Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Hon. Member for Upper Bann (Imprisonment)

Mr. Speaker: I have to inform the House that I have received a letter, dated 26 January 1987, from the Clerk of Petty Sessions, Lisburn, in the following terms:
I have to inform you that Mr. Harold McCusker, Member of Parliament … was convicted at Lisburn Magistrates' Court on 27th November 1986".
The letter goes on to set out the offence in detail and to say that the hon. Member for Upper Bann (Mr. McCusker) was fined £50 and ordered to pay other sums, and, in default, to be imprisoned for seven days. concludes with the words:
These amounts were not paid and a warrant to enforce the order was issued on 19th January, 1987.
I have now been informed that Mr. McCusker was arrested and lodged in prison today.
I shall cause the text of the letter to be printed in the Official Report.
Following is the letter.
Dear Sir,
I have to inform you that Mr. Harold McCusker, Member of Parliament of 33 Seagoe Road, Portadown, Craigavon, Co. Armagh was convicted at Lisburn Magistrates' Court on 27th November, 1986 of the following offence:—
He on the 10th day of April, 1986 on the public road at Ballinderry Cross Road, Ballinderry in the said district and county court division did use a mechanically propelled vehicle, Registration Mark NIJ 3803 for which a licence under the Vehicles (Excise) Act (N I.), 1972 was not in force. Contrary to Section 8(1) of the said Act. And whereas he is further liable under section 9(1) of the said Act to pay an amount equivalent to all arrears of duty owed by him and calculated as amounting to £16·66 from the first day of March, 1986 to the 30th day of April, 1986.
He was fined £50, ordered to pay £16·66 arrears of tax and £3·00 costs in 28 days and in default to be imprisoned for 7 days. These amounts were not paid and a warrant to enforce the order was issued on 19th January, 1987.
I have now been informed that Mr. McCusker was arrested and lodged in Prison to-day.

PRIVATE BUSINESS

ASSOCIATED BRITISH PORTS BILL

Read a Second time and committed.

BRIGHTON MARINE PALACE AND PIER (FINANCE, &C.) BILL

Read a Second time and referred to the Examiners of Petitions for Private Bills.

BRITISH RAILWAYS BILL

Order for Second Reading read.

To be read a Second time tomorrow.

HASTINGS BOROUGH COUNCIL BILL

Read a Second time and committed.

LONDON REGIONAL TRANSPORT BILL

WHITCHURCH BRIDGE BILL

Read a Second time and referred to the Examiners of Petitions for Private Bills.

BEXLEY LONDON BOROUGH COUNCIL BILL (By Order)

CITY OF WESTMINSTER BILL (By Order)

TEIGNMOUTH QUAY COMPANY BILL (By Order)

Order for Second Reading read.

To be read a Second time tomorrow.

ADVOCATES' WIDOWS' AND ORPHANS' FUND ORDER CONFIRMATION BILL.

Considered; to be read the Third time to morrow.

Oral Answers to Questions — TRADE AND INDUSTRY

Rover Group

Mr. John Mark Taylor: asked the Secretary of State for Trade and Industry if he will make a statement on progress toward achieving separate and distinct destinies for the various subsidaries of the Rover Group.

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Paul Channon): Rover Group has successfully concluded negotiations for the sale of Leyland Bus and the majority of Unipart. Negotiations are taking place for the disposal of majority interests of Jaguar-Rover-Australia and of Istel. As I told the House on 2 December 1986, commercial discussions on Leyland Trucks are being taken forward. The best way to develop the other businesses in the group will be considered in the context of the Rover Group's corporate plan, which I am studying.

Mr. Taylor: In thanking my right hon. Friend for that helpful reply, may I remind him that Jaguar, the first company to be liberated from the group, has just announced vacancies for 700 more men, and that last time he spoke in the House about Land Rover's future he looked to the prospect of either a trade buyer or privatisation? Since no trade buyer appears to be in prospect, may we look forward to privatisation?

Mr. Channon: I am grateful to my hon. Friend for pointing out to the House the enormous success of Jaguar, not just recently but for the past few years, as a splendid example of what can be done in the private sector. My hon. Friend is entirely right to remind me of what I said about Land Rover. The company is to be retained within the Rover Group while preparations are made for its later flotation or trade sale. I shall bear in mind my hon. Friend's preference for a flotation.

Mr. Park: Will the Secretary of State acknowledge that as each part is sold off the remainder will find it progressively more difficult to become viable?

Mr. Channon: No, Sir. I do not think that I could agree with that. Many of the separate bodies that have been sold off have been loss-making and therefore will not make the situation worse.

Mr. Beaumont-Dark: Does my right hon. Friend agree that many of us accept that some of the privatisation schemes have been good for the future of the British motor industry, not least for Jaguar, and that the continuing entity of Austin Rover is of crucial importance? Does he agree that we must consider the fact that Austin Rover is building up a good export record, has a great future as long as it is given a fair wind, and is not a lame duck but an emergent swan?

Mr. Channon: I agree with what my hon. Friend has said, as I so often do on matters relating to the motor industry. Austin Rover's export record is encouraging, as was its market share last month. I am sure that my hon. Friend is looking forward as eagerly as I am to discussing the corporate plan.

Mr. Wigley: Is the Secretary of State satisfied that the Rover Group, even as now constituted, shows enough interest and involvement in matters of public interest as well as in its own profit, especially in the context of exports, to which he has referred, where Rover parts may be used for exporting things built up from them? If there is a change in the company's structure, can the right hon. Gentleman ensure that that aspect is properly safeguarded?

Mr. Channon: I shall certainly consider what the hon. Gentleman has said. However, the directors of Rover Group have a fiduciary duty to the company. I shall have to examine in detail what the hon. Gentleman has said and write to him about it.

Mr. Grylls: Is my right hon. Friend confident that the proceeds from the sale of those different businesses will be sufficient to make it unnecessary for Austin Rover to ask the taxpayer for further funds?

Mr. Channon: I wonder whether I can persuade my hon. Friend to curb his natural impatience for news and wait until he hears the result of the Government's study of the corporate plan. I shall certainly bear in mind what my hon. Friend has said.

Mr. Terry Davis: Why will the Secretary of State not admit that Jaguar's success has everything to do with the efforts of its management and work force and nothing to do with its ownership? Why will he not tell Mr. Graham Day to get on with the job of getting Austin Rover's share of the domestic market back to its level of 23 per cent. eight years ago instead of simply accepting the present level of 15 per cent. and declaring more redundancies among the people who work at Austin Rover and its suppliers?

Mr. Channon: I certainly agree that Jaguar's success has been due to the efforts of its management and work force, but it is quite wrong not to take its corporate structure into account as well. The fact that Jaguar has been privatised has been a major factor in the company's success.
As to the second part of the hon. Gentleman's question, I hope that he will join me in helping today to achieve the aim which he and other hon. Members have in mind,

which is to increase Austin Rover's share of the domestic market. I am very glad to say that at the moment it is running above the level that the hon. Gentleman stated.

The North (Industrial Initiatives)

Mr. Favell: asked the Secretary of State for Trade and Industry if he will make a statement on the initiatives he has taken since 1983 to assist industry in the north.

The Minister of State, Department of Trade and Industry (Mr. Giles Shaw): Recognising its problems, we re-designated many parts of the north of England as assisted areas following the 1984 review of regional industrial policy. In total, 30 travel-to-work areas are assisted in my Department's three regions in the north of England, thus benefiting from regional schemes of assistance. These are automatic regional development grants, selective financial assistance and the activities of the English Industrial Estates Corporation. In addition, the efforts of my Departmenet's Invest in Britain Bureau and the three regional development organisations in the north of England have helped to secure nearly 220 separate decisions by foreign companies to invest in the north in the last three years.

Mr. Favell: The amount that has been done to help the north is impressive, as my hon. Friend has listed. As a fellow northerner, will he remind the House that Liverpool's greatness was built on the entrepeneurial spirit of Liverpudlians, Manchester on the commercial enterprise of Mancunians and Newcastle through the industrial enterprise of Novocastrians, not through Left-wing Socialists in town halls, who have done so much to destroy the reputation of the north for self-help and enterprise.

Mr. Shaw: I fully endorse my hon. Friend's wise analysis. As a fellow northerner—one from Yorkshire— I have to comment that a Labour-controlled local authority in south Yorkshire has recently declined to assist a small business because it did not consider that it would be socially useful to do so.

Mr. O'Brien: Will the Minister take on board the seriousness of the situation in the north, especially in the Dewsbury, Wakefield and Pontefract travel-to-work area where there is 16 per cent. unemployment? We have a 238-acre industrial site which is privately owned, but nobody will take up the offer to develop it. Will the Minister give the Wakefield area some assistance in veiw of the rising unemployment there, especially among the young?

Mr. Shaw: The hon. Gentleman knows that I am aware of the problems in parts of west Yorkshire and I concede that there are problems associated with attracting new industries to areas that have suffered structural decline. The coal industry, for example, has suffered decline. The hon. Gentleman knows that considerable time and effort must be expended to secure an improvement, and we are doing that.

Mr. Fallon: Will my hon. Friend confirm that, as a result of initiatives, the number of people in work in the northern region has risen by some 40,000 since 1983? Is he further aware that the only threat to industry in Darlington is the prospect of a Labour Government scrapping Trident, cancelling Sizewell and putting up inflation and the cost of of borrowing?

Mr. Shaw: I understand my hon. Friend's comments fully and I can confirm that in my trips to Europe and elsewhere I try to stimulate inward investment. It is the continuation of the Government's policies that firms are most concerned about.

Mr. Wainwright: Is the Minister aware that the Department's failure to restore the grants that were so greatly reduced by his predecessors has resulted in a number of non-European companies moving production from west Yorkshire to other parts of the European Community? For example, Case International is transferring a great deal of its tractor manufacturing to France. Will the Minister take some action?

Mr. Shaw: I am aware that there have been significant changes, but the hon. Gentleman will recognise that the proportion of the working population, especially in northern parts, has been increased by the redevelopment of the map tinder RDG2. I am aware of what the hon. Gentleman said about the Case works and have written to the chairman to ask for clarification of his intention.

Mr. McQuarrie: We hear about the north-south divide, but it appears that we now have a north-north divide. In reply to my hon. Friend the Member for Stockport (Mr. Favell) my hon. Friend the Minister did not refer to Scotland when talking about the north. Does he take account of Scotland, and is he prepared to discuss the restoration of development area status to parts of Scotland? Is he aware that there is high unemployment in my constituency?

Mr. Shaw: I hate to take issue with my hon. Friend on a matter on which he is expert, but as far as I am aware we do not have responsibility for regional policy in Scotland. That is a matter for my right hon. and learned Friend the Secretary of State for Scotland.

Mr. Nicholas Brown: Will the Minister confirm that no region has done more to help itself than the northern region, where co-operation between the regional Trades Union Congress, the regional Confederation of British Industry and local authorities is far advanced? What is the Department's view of he Northern Region Development Company, which has been set up by those organisations on a tripartite basis?

Mr. Shaw: I greatly welcome the creation of the Northern Region Development Company. It is an admirable example of local authorities reaching agreement after many years of not doing so, and forming with other local bodies and industry a base for promoting the northern region. I trust that the company will continue to prosper. We wish it well.

Mr. Phillip Oppenheim: Can my hon. Friend tell us a little about the situation in the north which the Government inherited in 1979? Is it not true that under the Labour Government 70 per cent. of manufacturing job losses were lost in the north and that the Labour Government submitted a paper to the European Community in 1978 saying that the situation in the north was disastrous because of the general state of the British economy?

Mr. Shaw: My hon. Friend is quite correct. There has always been a view that there were significant problems which the Labour Government did not address carefully. The regional development policies pursued by the

Government play a significant part in improving conditions in the northern region. Some 9 per cent. more money is going into such policies this year.

Mr. Gordon Brown: Will the Minister confirm that during the seven years of Conservative Government manufacturing employment has fallen by 34 per cent. in the north, by 35 per cent. in the north-west, by 36 per cent. in Wales and by more than 30 per cent. in Scotland? Will he confirm that the real value of manufacturing investment in the past seven years has fallen by 31 per cent. in the north-west and by more than 40 per cent. in the northern region? What practical purpose will be served by halving the value of regional development grants yet again? How can he talk of recovery when he is destroying the means of recovery?

Mr. Shaw: There is plenty of room for arguing about the basis of the hon. Gentleman's figures and I shall not confirm any of them. I can confirm, however, that we have spent £419 million in the current year. That is a substantial increase on what was spent in 1979. I can also confirm that we are dedicated to improving conditions in the northern parts of Britain to enable the imbalance of unemployment be eliminated.

Manufactured Goods

Mr. Ron Davies: asked the Secretary of State for Trade and Industry when he next intends to meet the Confederation of British Industry to discuss the trade deficit in manufactured goods.

The Minister for Trade (Mr. Alan Clark): My ministerial colleagues and I meet the CBI regularly at the National Economic Development Council and on other occasions and a variety of subjects are discussed. I have no plans for a separate meeting on this subject.

Mr. Davies: When the Minister next meets the CBI through the forum which he has mentioned, the NEDC, will he discuss with it last month's deficit in manufacturing trade of £753 million? Will he discuss with it also the consensus that seems to exist that our trade position will worsen and that next year we shall have a deficit of about £3 billion in our overall balance of payments? Given the deterioration in Britain's manufacturing trade, what proposals does the Minister have for the time, which will shortly arrive, when North sea oil is expended?

Mr. Clark: Stripped of their doctrinal slant, I share some of the hon. Gentleman's views. I accept that a manufactured import can mean, all too often, a job exported. That is all true, but, in a free society, consumer choice—taking consumers as both firms and individuals—is paramount. The trade gap is the aggregate of the many individual consumer choices and it points in the direction of a preference for the foreign product.

Mr. Hickmet: Has my hon. Friend seen the CBI report published today which shows that output and export opportunities for industry are the highest for many years, and perhaps since the war, and that the prospect for British exporters, as a result of beneficial exchange rates and the economic and industrial policies pursued by the government, is the best for many years? Is not the only danger that we shall return to the bad old ways of the policies pursued by the Labour party when it was in Government, should the country be so unfortunate as to have a Labour Government after the next general election?

Mr. Clark: My hon. Friend is right to draw attention to the opportunities and prospects. The export performance of British industry is strong. There is, however, a trade gap which is accounted for, as I said to the hon. Member for Caerphilly (Mr. Davies), by the aggregate individual preference for foreign imported goods. When British manufacturers are perceived by the domestic consumer as competitive, we shall see the gap being corrected.

Mr. Hoyle: When the Minister meets the CBI, will he discuss with it, along with the Secretary of State, the Department's plans to try to persuade Honda to take a large share-owning in Rover, along with the scrapping of the Metro Mini? Would those plans not mean the demise of Rover as a group that can design, engineer and manufacture its own products?

Mr. Clark: I do not know the basis on which the hon. Gentleman makes his accusations. He has heard my right hon. Friend the Secretary of State express his confidence in the increasingly creditable performance of Austin Rover and its prospects for the future, a view which has been echoed by my hon. Friend the Member for Glanford and Scunthorpe (Mr. Hickmet).

Mr. Robert Atkins: May I confirm my hon. Friend's view by drawing his attention to the report of the speech delivered to the Welsh CBI on this very issue by the Leader of the Opposition, suggesting that the next Labour Government would not, within their policies, be able to achieve any increase in manufacturing jobs? Does this not fly in the face of some of the noise, cant and humbug that we hear from the Opposition Benches?

Mr. Clark: I did not see the announcement. Perhaps it is part of the new image of candour and open speaking cultivated by the Leader of the Opposition. How long that will last remains to be seen.

Mr. Robin Cook: Will the Minister confirm that the sum of the Government's record in manufactured trade is that they inherited a surplus of £3 billion and have managed to convert it into a deficit of £6 billion? Is the Minister aware that this morning's figures show that the visible trade deficit last year quadrupled to £8·5 billion, yet Conservative Members can only say "So what?" Is he aware that the only other country that manages to combine an oil surplus with a deficit on visible trade is war-torn Iraq? As a well-known British patriot, what possible pride does he take in that parallel?

Mr. Clark: The hon. Gentleman is a master craftsman in bandying statistics. I know that he has expressed reservations in a most elegant and amusing way about the City of London. He may care to ponder on the fact that the total foreign exchange earnings surplus in the City of London last year was £8·5 billion, which exactly matches the deficit on manufactured account.

Electronic Data Systems

Mr. Dalyell: asked the Secretary of State for Trade and Industry if he will list his Department's current contracts with Electronic Data Systems.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher): My Department has no current contracts with Electronic Data Systems.

Mr. Dalyell: With regard to EDS contracts under discussion, has any Minister had cause to refer matters in relation to Electronic Data Systems and immigration rules to the Director of Public Prosecutions? What would other companies abroad think if major domestic Government contracts, of great value, went to this particular American company and if Plessey and Racal and a number of other British companies were intimately involved in competition?

Mr. Butcher: I am grateful to the hon. Gentleman for bringing certain matters to the attention of Ministers regarding the company's alleged view on how its employees treat our immigration controls. In the first instance, the allegations would be a matter for my right hon. Friend the Home Secretary. If they were proved, we should need to consider whether that affected any particular EDS bid.

Mr. Eastham: Has it been drawn to the Minister's attention that some of the employees have been encouraged to falsify their work applications? If that is the case, will those forms be called in and examined by the Ministry, and will prosecutions take place?

Mr. Butcher: The manner in which any follow-up inquiries are made will, of course, be a matter for my right hon. Friend the Home Secretary. My Department's remit is to consider its contractual arrangements with different suppliers and, of course, to offer some guidance to the Central Computer and Telecommunications Agency on the current bid for the major Government data network contract. I note what the hon. Gentleman has said and will ensure that his views find a place in the right quarter.

British Steel

Mr. Hickmet: asked the Secretary of State for Trade and Industry if he will make a statement on the prospects for British Steel.

Mr. Channon: The prospects for the United Kingdom steel industry, and for the British Steel Corporation in particular, are more encouraging today than at any time for at least 10 years. BSC is now operating profitably and the Government intend to return the corporation to the private sector during the course of the next Parliament.

Mr. Hickmet: I thank my right hon. Friend for his most encouraging reply. He will be aware that the British Steel Corporation works at Scunthorpe are the jewel in the crown of the BSC. Bearing that in mind, what does my right hon. Friend think about the Labour party policy in relation to imposing a 1 per cent. levy on the total turnover of companies for training purposes? What are his views about Labour party proposals to use the nationalised industries, such as BSC, to recruit persons for social reasons?
Bearing in mind that state aids to the steel industry in Europe were stopped in December 1985, does my right hon. Friend agree that those proposals pose a tremendous threat to the future of BSC? Surely the answer is to give the ownership of the industry to the very people who work in it so that they can have a share in its increasing prosperity and its future running.

Mr. Channon: I agree with my hon. Friend. It is essential that this industry be returned to the private sector at the earliest possible date. My hon. Friend referred to the


Labour party's proposals. I am in some difficulty about the 1 per cent. training levy on turnover, because we do not hear about it. I [Interruption.] I notice that Labour Members are sensitive about it. It would cost an additional £30 million to £40 million, which would need to be taken out of the corporation's hard-earned profits. I do not know whether it will be 1, 2 or 3 per cent.

Dr. Bray: Is the Secretary of State aware that, as this is a technologically advanced industry, it will gain. not lose, from a properly organised training scheme? Is he further aware that, under the management of this Government, the British Steel Corporation has reduced expenditure on research and development by 45 per cent. in real terms since 1979 and has failed to take advantage of funds available from the European Community? Can he give an assurance that a privatised steel industry, if the Government are in a position to secure that result, will maintain manufacture at the five integrated sites?

Mr. Channon: I refer the hon. Gentleman to the assurances given on many occasions about the five integrated steel sites. I have to disagree with him about a training levy on turnover. It would cost an additonal £30 million to £40 million, if that is what is proposed. I wish I could get it straight from the Labour party whether it is proposing this. Some days it says yes, some days it says no, and some days it says double. I notice that no one is leaping up to tell us what the truth is. I shall look into the point that the hon. Gentleman makes about research.

Mr. Wrigglesworth: Is not the best thing for the British Steel Corporation, rather than distracting the management with privatisation, to help it to consolidate its recent success and to open up new markets, particularly in Europe, so that it can build and grow in its present form?

Mr. Channon: I agree with what the hon. Gentleman says about consolidation and helping the corporation in its efforts to do that. I was surprised to hear the hon. Gentleman, on behalf of the alliance, speaking against the privatisation of BSC. That is a strange posture for the hon. Gentleman to adopt, but, as he has done so, the electors will have to take note of it.

Mr. Holt: While it would be churlish to disagree with my hon. Friend the Member for Glanford and Scunthorpe (Mr. Hickmet) as to which steelworks are the best, those in my constituency are certainly another jewel in the crown of BSC. None of my constituents will allow the remarks of the hon. Member for Stockton, South (Mr. Wriggleworth) to pass unnoticed. They will realise that the alliance is against the privatisation of British Steel, which must and will come about, to the benefit of my constituents.

Mr. Channon: I am glad to have my hon. Friend's robust support. My hon. Friends the Members for Glanford and Scunthorpe (Mr. Hickmet) and for Langbaurgh (Mr. Holt) will, I am sure, play a major part in the privatisation of British Steel.

Mr. Crowther: When the Council of Ministers considers in a few weeks' time the further massive round of capacity cuts that are being worked out between the Commission and the steel makers through Eurofer, will the right hon. Gentleman bear in mind what the Select Committee on Trade and Industry has said many times, that the British steel industry has taken more than its fair share of cuts and should not have any more imposed on it? In view of what

the right hon. Gentleman said about the competitiveness of the British steel industry, is he prepared to stand up and defend it against further reductions?

Mr. Channon: I have always taken a great deal of notice of anything that the Select Committee on Trade and Industry has said, and I shall certainly pay attention to what it says on this topic, as on others. I have made it clear that if Eurofer makes formal proposals to the Council of Ministers, the BSC contribution would have to be consistent with the strategy announced in August 1985, to retain the five integrated works for at least the following three years, and must not prejudice decisions of the strategy for the five integrated works thereafter.

Mr. Williams: Does the Secretary of State realise that that is not enough? Is he aware that if there is the cut envisaged by Brussels of 19 million tonnes, or the smaller, 12 million tonnes cut to which he has already referred, and we took a share in that, eventually that would represent a death threat to one of our major steelworks? Will he give a clear assurance that he is telling Brussels, here, now, and unequivocally, that we will accept no further cuts in our hot rolling capacity?

Mr. Channon: I have already told the House. Indeed, as I understand it, there are no formal proposals before the Council of Ministers and no decisions have been taken. If any proposals were to come forward they would have to be consistent with what I have just told the hon. Member for Rotherham (Mr. Crowther). I repeat the assurances that have been given on many occasions from this Dispatch Box.

Hotels (Telephone Charges)

Mr. McCrindle: asked the Secretary of State for Trade and Industry if he has received any representations from consumer organisations concerning the level of charges imposed by hotels for the use of telephones by hotel guests.

Mr. Butcher: No, Sir.

Mr. McCrindle: Is it not disgraceful that some leading British hotels are applying mark-ups of anything up to 300 per cent. on direct dialled telephone calls? Does my hon. Friend agree that that must act as a deterrent to foreign visitors, not least Americans, since the practice is much less widespread in America? Will he join me in suggesting to visitors that they should ask for a list of the charges before making calls and, if the charges appear to be unreasonable, they should consider using a public telephone box?

Mr. Butcher: Not only do I agree with my hon. Friend. but am glad to say that the British Hotels, Restaurants and Caterers Association, to which most sizeable hotels belong, recommends that where a charge is made it should be clearly stated in the hotel tariff. In order to ensure that hotel clients are better informed about the level of telephone charges, the hotel industry's voluntary code of booking practice introduced a provision in 1985 requiring hotels that make additional charges on telephone calls to state in writing on a card alongside each telephone the Fact that such charges are made. I shall draw my hon. Friend's other comments to the attention of my hon. Friend the Under-Secretary of State for Employment.

Mr. Butterfill: Is my hon. Friend aware that similar mark-ups on telephone charges are made by private hospitals and nursing homes?

Mr. Butcher: It is for the establishment to decide whether that is a deterrent to future customer loyalty.

Mr. Waller: For consumer choice to operate, does my hon. Friend agree that it is vital that adequate information should be made available to consumers such as hotel guests? As mark-ups on telephone charges in British hotels seem to be so much higher than in almost every other country, would it not be right to insist, through the introduction of legislation if necessary, that hotels should publish a list of their charges and end a justifiable cause of dissatisfaction?

Mr. Butcher: As I have said, there is a voluntary code of practice that recommends that sort of procedure. I shall draw my hon. Friend's comments to the attention of our hon. Friend the Under-Secretary of State for Employment.

Share Dealings

Mr. Cohen: asked the Secretary of State for Trade and Industry if he will make a statement on progress in current investigations into share dealing in the City.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard): All the investigations are being pursued as rapidly as possible, but I cannot estimate how soon they will be completed. It would not be desirable to report on progress of investigations before they are completed.
The inspectors appointed to investigate certain dealings by Mr. Geoffrey Collier have submitted their report to my right hon. Friend, and a summons has been served on Mr. Collier. As announced on 7 January, Mr. Brooke and Mr. Kennedy have been asked, in the light of that report, to investigate other possible contraventions.

Mr. Cohen: Are all the big firms involved in the Guiness illegal dealings fully co-operating with the Department of Trade and Industry investigations? If not, why do the Government not use their muscle to compel them to co-operate? If they are co-operating, why, when the Minister says that he wants prompt action, is it going to take up to a year, perhaps more, to bring some of the culprits to justice? Is it not the case that the Government just want the scandal to die down and are lightweight in tackling big City fraud?

Mr. Howard: I reject utterly the hon. Gentleman's last suggestion. The inspectors appointed by my right hon. Friend the Secretary of State and myself are independent of the Department of Trade and Industry. They are distinguished professional people. They are making full use of the sweeping powers available to them under the Companies Acts and they will bring the complicated investigations to a conclusion as soon as they can in a manner consistent with full, thorough and effective inquiries.

Mr. Tim Smith: Does my hon. and learned Friend agree that if the serious frauds office proposed in the Criminal Justice Bill is to do its job effectively it must have substantial powers? Is it not extraordinary that at a time when it is protesting strongly about insider dealing and other fraud in the City, the Labour party is doing its best to undermine the serious frauds office by stripping it of its powers?

Mr. Howard: There is a good deal in what my hon. Friend says. There is a marked contrast between the

attitude taken by Labour Members when it comes to asking for powers to deal with matters such as insider dealing and the attitude taken by their Front Bench spokesmen on the Criminal Justice Bill, where the Labour party seeks to whittle away the powers which the Government would like to give to the serious fraud office to investigate allegations of serious fraud.

Mr. Campbell-Savours: Will the Minister confirm that today I have given him privately the name of a licensed security dealer in the City who is trading fraudulently; who at this very moment is trading shares in the City? Does the Minister accept that, if he fails to take action today to close down the activity of that company and people lose money by buying in, he will have acted negligently and people can fairly look to the Government for compensation?

Mr. Howard: I can confirm that the hon. Gentleman was in touch with me earlier today, and I have made urgent inquiries as a result of that conversation. My Department is fully aware of the case to which he refers, and I can assure him that such steps as may be necessary will be taken.

Mr. Dorrell: Does my hon. and learned Friend agree that one of the principal lessons of the events in the City during the past 12 months is that there is a need for a substantial review of the rules governing disclosure of share bargains at the moment they are completed? Without such a review, is it not the case that the takeover panel is not only toothless but is in danger of being blindfolded? Will my hon. and learned Friend take steps to initiate such a review?

Mr. Howard: There are powers now available to deal with such matters. Of course, we shall be ready to learn the lessons, which no doubt will have to be learnt, as a result of recent events.

Mr. Robin Cook: As the Minister resisted Labour amendments to put the takeover panel on a statutory basis, is he satisfied with its performance during the Guinness bid last spring? If so, can he explain how it was that the takeover panel found nothing suspicious about £500 million chasing about one third of the Guinness stock? After that fiasco, how can he leave the supervision of takeovers to a voluntary self-regulating body with no serious powers of investigation and no statutory powers of discipline? Why does he not now accept that the public interest must be protected by an independent public watchdog?

Mr. Howard: The takeover panel has hitherto performed effectively. We shall seek, as I said a moment ago, to draw any lessons that are to be learnt from recent events at the appropriate time. My right hon. Friend the Secretary of State will have something to say about the takeover panel during the debate later this afternoon.

House of Fraser

Mr. Teddy Taylor: asked the Secretary of State for Trade and Industry if he has yet completed his consideration of the new information supplied to him by Lonrho plc in December 1986 about the circumstances in which House of Fraser's purchase by the Al Fayed family was approved; and if he will make a statement.

Mr. Channon: No. The material submitted on behalf of Lonrho plc concerning the purchase of House of Fraser by the Fayed family is voluminous and is still receiving careful consideration.

Mr. Teddy Taylor: While I understand that it will take some time for my right hon. Friend to consider the startling new information provided by Lonrho, will he say in general whether he or the Monopolies and Mergers Commission has any power whatsoever to direct the unscrambling or the alteration of a takeover or merger if information that was provided at the time of approval proves to be inaccurate or misleading?

Mr. Channon: If it appears to me that material facts are brought to my notice or made public that were not disclosed at the time, I have a discretion whether to make a reference to the Monopolies and Mergers Commission. If the commission makes an adverse finding, I have discretion to remedy or prevent the adverse effects identified by the commission through the normal powers available to me, including, in appropriate cases, the power of divestment. I make it clear that I make no comment about this particular case.

Mr. Campbell-Savours: Is the Secretary of State aware that Harrods, under the former management, paid roughly £20 million per year in corporation tax to the Treasury? Is he further aware that, since the takeover by the Al Fayeds and the registration of the company in Liechtenstein, they no longer pay taxes to the British Government because they choose to offset their liability against borrowings to borrow for the purchase of Harrods? Is that not a disgrace? Did the Secretary of State not know, when the original decision was taken, that that was likely to happen, and in taking that decision did he not, in effect, write of £20 million worth of revenue to the Exchequer annually—inflation proofed?

Mr. Channon: I think that I would be far wiser not to comment on what the hon. Gentleman says today. I am considering all the information supplied to me by Lonrho in December 1986. I shall consider carefully everything that is said in the House and that is supplied by Lonrho.

Sir Alex Fletcher: Does my right hon. Friend agree that the Al Fayed family was greatly assisted in acquiring the House of Fraser and Harrods because Lonrho sold it a 30 per cent. stake in the House of Fraser?

Mr. Channon: My hon. Friend makes another important point, but, again, I would prefer not to comment on the details of the case until I am in a position to consider the whole problem carefully.

Small Businesses

Mr. Amess: asked the Secretary of State for Trade and Industry what assistance his Department gives to small businesses seeking to sell their goods abroad.

Mr. Alan Clark: A comprehensive range of help for exporters is available through the British Overseas Trade Board. The board's objective is to stimulate more small firms to export successfully and many of its services are designed to meet the particular needs of the small business.

Mr. Amess: Is my hon. Friend aware that many small businesses in my constituency of Basildon wish to take advantage of the strategic importance of the town in

selling their goods and services abroad? However, they feel that his Department mainly helps larger firms. Will he please say what he is doing to try to dispel that impression?

Mr. Clark: My hon. Friend is right to draw attention to that. I am sorry to hear what he tells me about small firms in his constituency, because, in fact, some 70 per cent. of the clients of the British Overseas Trade Board are drawn from the category of firms with a turnover in the range of £1 million to £10 million. In fact, the BOTB established a small firms committee in 1985. The co-chairmen are both board members, and the committee commissioned a report to identify the export potential of firms in that range.

Mr. Meadowcroft: Does the Minister accept that one of the real problems for the smallest businesses is the inability of key members of the company to spend long periods abroad? What liaison is there between his Department and the Foreign Office to enable companies to secure adequate and effective agents abroad so that they can sell their products?

Mr. Clark: There is an arrangement whereby, for a minimal fee, small firms can have a full range of advisory and representational services arranged by post in the country where they intend to operate. We have just adjusted the scale of fees in that service to comply more realistically with the different degrees of importance and complications of the markets involved.

Mr. Richard Page: Is my hon. Friend aware that a small and, dare I say, distinguished group of hon. Members are discussing with the BOTB methods of setting up pilot schemes to help small firms on a pro-active basis? Will he ensure that those pilot schemes receive full publicity to make sure that they are given every opportunity to help smaller businesses?

Mr. Clark: Yes. I congratulate my hon. Friend and other of my hon. Friends in the group who are pushing that idea, to which we attach much importance. In principle, we are willing to help found, on a pilot basis, a small number of export enterprise centres away from the main regional offices of the BOTB. At present we are looking at a scheme in Chelmsford, with Essex county council, but, of course, as my hon. Friend will appreciate, that is dependent to some ex tent on getting a certain level of private participation as well.

Mr. Madden: Is the Minister aware that in surveys conducted by the Bradford chamber of commerce business leaders have blamed the Government's interest rate and exchange rate policies as the major constraints on their businesses? Does he agree that the best thing that he could do to help businesses would be to modify those policies and introduce policies of investment-led economic expansion rather than the minimal measures that he has been discussing so far?

Mr. Clark: The hon. Gentleman may be a little behind the times. As he knows, or as the Bradford chamber of commerce will tell him if he were to ask, the exchange rate policy—if that word applies—or at least, the results of exchange rate fluctuations, have been an effective devaluation of the pound which has been a great help to British exporters. It varies from 18 to 40 per cent. against the deutschmark, and that is the subject of particular attention in the CBI quarterly report to which reference was made earlier this afternoon.

Mr. Peter Bruinvels: As I represent many small businesses in Leicester, I thank my hon. Friend for the help that his Department has given to those businesses. Does he agree that the major problem that has been highlighted in Bradford is high rates, which, in cities such as Leicester, kill jobs? That causes particular problems for small textile firms that are exporting. These firms would welcome putting "Made in Leicester, England" on their labels, but as a result of new regulations they may not be able to signify the country of origin. These companies are proud, as I am, to have goods made in Leicester.

Mr. Clark: I am glad of the opportunity to dispel immediately the mistaken idea that it is no longer legal to put an origin mark on products. Although we are no longer allowed as a Government to require manufacturers to include that mark, it is highly desirable that all manufacturers should put that mark on, because that will allow the consumer to make the appropriate choice and reinforce the consumers' understandable preferences in that area.

Mr. John Smith: As the Minister is presumably aware of the major cuts that have been made in the number of staff and the budget available to support exports, especially for small firms, and, in particular, the suspension of the market entry guarantee scheme, the reduction in the number of overseas trade fairs supported by the Government and the reduction in the number of outward missions supported, can he tell the House what possible sense it makes for a country with Britain's appalling trade deficit in manufactured goods to withdraw support for small firms seeking to exploit export markets?

Mr. Clark: Very understandably, the right hon. and learned Gentleman did not quote the figures. He simply uttered the concepts. The budget has been increased and will be increased by £1·5 million next year. The number of firms helped in their attendance at trade fairs over the past year was 7,000. The market entry guarantee scheme is neither appropriate to, nor utilised by, small firms.

EC-USA (Trade Dispute)

Mr. Geraint Howells: asked the Secretary of State for Trade and Industry if he is satisfied with the progress of efforts to resolve the current trade dispute between the European Community and the United States of America; and if he will make a statement.

Mr. Alan Clark: Further negotiations have taken place between the Community and the US Administration during the last few days. On 26 January the Council agreed, with the full support of the United Kingdom Government, that these should continue with the aim of securing early settlement of the dispute.

Mr. Howells: Does the Minister agree that unless the grain dispute between Spain and America is settled satisfactorily in the short term it could cost European taxpayers up to £300 million in compensation, and that the Americans in turn could impose a levy of 200 per cent. on some of our exports from the EEC?

Mr. Clark: The hon. Gentleman is quite right to remind the House that the possibilities of escalation are very serious. However, conversations continue and I under-stand that there will be further contact between Commissioner de Clercq and the United States trade

representative Mr. Yeutter this afternoon. I suggest to the House that it is not especially desirable to discuss the details of various negotiating ploys at this stage.

Mr. Galley: My hon. Friend will be aware that the "Buy American" provision in some of the protectionist legislation is having a seriously adverse effect on the machine tool industry in my constituency and elsewhere. Does he appreciate that many sectors of British industry are fed up and have the impression that Britain plays fair and other countries do not? Will he express in the strongest possible terms to the United States Administration our anger at their growing unfair protectionism and to the EEC Commission the regret of British industry at the Commission's lack of action?

Mr. Clark: My right hon. Friend the Secretary of State and I frequently express our indignation at this in our meetings with representatives of the United States Government. Although my hon. Friend's remarks are not strictly relevant to the EEC-United States dispute, and the United States is entitled under GATT to compensation for loss of trade, there is no doubt that the manner in which the negotiations were opened by the Americans illustrates their increasing propensity for taking unilateral action in trade, irrespective of their obligations under GATT. There have been several examples of this, of which the "Buy American" provision in respect of machine tools is one. The super fund, the customer user fee, tax discrimination in respect of light aircraft and the semiconductor arrangement with Japan, in their different ways illustrate the unilateral exercise of United States muscle. They are undesirable and the subject of legitimate protest.

Mr. Carter-Jones: Is the Minister aware that he would have the support of the entire House if he did not allow the negotiations to prevent his Department from providing speedy support for the A330 and A340 Airbus? Is he aware that his Department's support of the A320 Airbus, which preserved that high technology, is likely to be repaid in the very near future?

Mr. Clark: Yes, Sir. The two subjects are not easily taken together, but I endorse and support everything that the hon. Gentleman said. He is right to say that the A320 has been an outstandingly successful aircraft. There is no doubt that its encroachment on a market that has hitherto been dominated by the United States is giving rise to much heart-searching among Americans in an attempt to stifle it.

Mr. Roger King: Trade wars have a habit of escalating. Can my hon. Friend confirm that with the west midlands and the midlands generally poised to start the export of the Rover Sterling and Range Rover cars in the next few weeks, the prospect of a trade war extending to cars would place the future of the British car industry in jeopardy?

Mr. Clark: I understand why my hon. Friend makes the point, but we are still a long way from escalating the war out of agriculture. Our objectives are, naturally, to reach a compromise and to prevent another round of escalatory measures, even within the confines of agriculture.

Mr. Stuart Holland: While allowing for the loss of United States exports to the European Community following the accession of Spain and Portugal, may I ask whether the Minister agrees that the underlying pressures for protection in the United States are aggravated by increasing imports into the United States from American


companies abroad? Will he urge the United States authorities to restrain the punitive protection that they are imposing on individual United Kingdom companies, such as Burroughs, and in sectors such as gin?

Mr. Clark: The United States economy is already in such disarray that it would not he appropriate for me to urge measures or sanctions upon its representatives during our negotiations.

Merger and Competition Policy

Mr. Greg Knight: asked the Secretary of State for Trade and Industry when he hopes to complete his review of Her Majesty's Government's merger and competition policy.

Mr. Channon: My Department is still receiving evidence, and it will be some time before the review is completed.

Mr. Knight: Does my right hon. Friend agree that the proper way to proceed in this matter is to take account of all the representations that are received before reaching any conclusions and not to make snap judgments merely to satisfy the bleating Opposition? However, does he accept that there is a need for clear and unequivocal guidelines so that companies know where they stand and are not subject to decisions made at random or on an unpredictable basis?

Mr. Channon: My hon. Friend's latter point is entirely right. Recently, I met representatives of the CBI to discuss the matter and they urged on me the need for as much predictability as possible and for consistency in the application of policy. I am determined to achieve that. I also agree with the first part of my hon. Friend's question. On these very important issues, it is essential to take considered decisions and not to be rushed into action.

Mr. Eastham: May I impress upon the Minister the great urgency for reconsideration of monopolies and mergers policy? I draw to his attention the activities of a

company in the north-west called Valuedale which are causing great concern to the Simon Engineering Organisation and a great deal of loss of confidence, which will affect its investment policies for the future. Is it not about time that successful companies should not have to suffer the pressures that they encounter with the parasites that have climbed on to their backs?

Mr. Channon: I know of the hon. Gentleman's concern about this case. It is shared by my hon. Friend the Member for Stockport (Mr. Favell) and others. I hope that the hon. Gentleman will make his point of view well known in his part of the world. I am sure that those responsible for deciding—the shareholders—will take very much into account what he has said. It is for the shareholders to decide. I am sure that the hon. Gentleman will do what he can to influence them.

Mr. Dykes: Will my right hon. Friend bear in mind that competition in retail and marketing benefits consumers by lower shop prices? Therefore, in his review, will he exercise great care when he receives complaints about dumping from manufacturers and retailers who are less efficient than most?

Mr. Channon: I do not think that this issue has much to do with dumping, but I shall certainly examine the point that my hon. Friend has raised.

Mr. Wrigglesworth: Is the Secretary of State aware that widespread dissatisfaction and uncertainty over the Government's monopolies and mergers policy are caused partly as a result of recent events, but also because of the general history of the monopolies and mergers policy? Therefore, will he bring forward the results of his review as quickly as possible?

Mr. Channon: I do not accept that there is all that much uncertainty. The decisions have been consistent. In 1984 my right hon. Friend the then Secretary of State announced that references would be made primarily on the ground of competition. That has remained the policy, and it is well understood.

High Court Injunction (Mr. Speaker's Order)

Mr. Peter Shore: On a point of order, Mr. Speaker. May I exceptionally put a point of order of great importance to you and to the House of Commons, Mr. Speaker? It was my clear understanding at the end of yesterday's debate that the House of Commons, in accepting the manuscript amendment of my right hon. Friend the Member for Chesterfield (Mr. Benn), agreed that your ruling on 22 January prohibiting the showing of Mr. Duncan Campbell's film in the precincts of the House would last until the Committee of Privileges reported and the House itself debated the Committee's report. This morning, in the BBC's "Today" programme, the Leader of the House, answering questions from Mr. John Cole, said the following — "The Speaker has indicated"—[Interruption.]

Mr. Speaker: Order. The hon. Gentleman prefaced his remarks by saying that this is an exceptional case. This is a matter of great importance to the whole House of Commons. I shall deal with it now.

Mr. Shore: The Leader of the House, in response to a question by Mr. John Cole, said:
the Speaker has indicated that his ruling concerning the showing of the film in the Palace of Westminster will continue as long as the injunction.
That, indeed, was the central issue of yesterday's debate when the House specifically rejected the connection between your ruling of 22 January and the court's injunction, Mr. Speaker. As the Leader of the House is also Chairman of the Privileges Committee, to which the matter has now been referred, it would be extremely important if you, Mr. Speaker, were to guide the House and, in particular, were able to reaffirm the words you used in column 273 of Hansard when, in reply to the Solicitor-General last night, you said:
my instructions of 22 January will remain in force until the House itself can make a decision following the report of the Committee of Privileges". —[Official Report, 27 January 1987; Vol. 109, c. 273.]

Dr. John Gilbert: Further to that point of order, Mr. Speaker. For the purposes of clarification, could you confirm that your instruction of 22 January in

no way referred to the operations and work of Select Committees in connection with their power to send for persons, papers and records?

Mr. Speaker: Normally, I do not take points of order at this stage unless they arise strictly out of questions, but it seems to me that this is a matter of considerable importance which the whole House would wish to have clarified. Therefore, I exceptionally agreed to take them now.
May I reaffirm what I said yesterday at column 273 of Hansard, namely, that my instruction of 22 January will remain in force until the Committee of Privileges reports to the House and the House has made its determination thereupon, unless in the meantime that injunction has been removed.
May I say to the right hon. Member for Dudley, East (Dr. Gilbert) that I have also been asked, by him and by other hon. Members, whether my instruction of 22 January applies to Select Committees. The House will be aware that I have no authority to intervene in the operations of Select Committees, which are given their powers directly by the House. Accordingly, my instruction relates to Members acting on their own responsibility and not to Select Committees.

The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): Further to that point of order, Mr. Speaker. On the first point raised by the right hon. Member for Bethnal Green and Stepney (Mr. Shore), of course I fully endorse the interpretation that you gave, Mr. Speaker, and if any remarks of mine on the BBC indicated otherwise, it was wholly unintended.
As to the second point, thank you for giving us this ruling, Mr. Speaker, which we will wish to study carefully.

Mr. Tony Benn: Further to that point of order, Mr. Speaker, and given what you have said about Select Committees, I take it that the Committee of Privileges will be free to see the film, which it will have to do to discharge its task. I take it that nothing that the Lord Privy Seal said on the radio this morning would indicate that the Government wish to interpose an objection to the Committee of Privileges seeing the film when you yourself have waived any objection to it.

Mr. Speaker: That is a decision for the Committee of Privileges and not for me.

Training and Employment Measures

The Paymaster General and Minister for Employment (Mr. Kenneth Clarke): I wish to make a statement on a new package of training and employment measures. I apologise in advance to the House because the statement is on the long side, but these are important matters. This is a large package and I know that the House would wish to be fully informed sbout it.
Unemployment has fallen for five consecutive months and is now down by more than 100,000. Vacancies are standing at their highest levels this decade. Our unit wage costs are now rising more slowly than the rate of inflation and are beneath those of our principal overseas competitors. We shall shortly enter our seventh successive year of economic growth.
All this, building on the firm foundation of the million new jobs the economy has created since 1983, can only be good for employment. But with some skill shortages already emerging and unemployment at its present level there is no room for complacency. The Government have therefore reassessed the scope and direction of the employment, enterprise and training measures within existing departmental programmes. As a result my noble Friend the Secretary of State for Employment is writing to the chairman of the Manpower Services Commission to ask the commission to undertake further measures that will give priority to our task of motivating and training unemployed people, particularly the younger generation, to fill the jobs that are now becoming available.
First, restart is a success. By the end of March this year the Manpower Services Commission staff should have interviewed all the 1·25 million people who will have been out of work for over a year. This has been an enormous task. I would like to pay tribute to our staff in the MSC, not only for the forty thousand interviews a week that they have undertaken but for the enthusiastic and sensitive manner in which they are completing their task of offering advice and help to long-term unemployed people.
We can see already that this programme is bringing help and assistance to the long-term unemployed. In the latest figures, long-term unemployment fell in three months by 7,000 when in the previous year it had risen over the same period by 25,000. I am confident that this improvement will be maintained as the programme develops and as the economy continues to strengthen.
No other industrialised nation provides such a package of individual help to each and every long-term unemployed person. But even this is not enough. Last October we announced that the Manpower Services Commission would pilot, in nine areas, restart interviews being offered to those out of work for six months or more. We thought that the earlier the help was received the more effective it would be. The results of these pilots have convinced us of the need to extend the restart counselling in two ways.
First, there will be an additional earlier interview. From the end of March, everyone who becomes unemployed for more than six months will be invited to attend a restart interview. But we have decided to go further, and our second extension is to offer a restart interview at regular six-month intervals. In the future there will be regular

contact between Manpower Services Commission staff and unemployed people, to help them, at different times and in different ways, back to work.
The counselling interview is, of course, only the first step—although a vitally necessary one—in the process of getting the unemployed back into work. That brings me to the second of the new measures I am announcing today.
Last October we also announced that the Manpower Services Commission would commence piloting an entirely novel training scheme designed specifically to meet the needs of those who have been out of work for six months or more. This scheme has three essential elements. It applies to those who have been out of work for the requisite period, it takes place on employers' premises and it must lead to recognised vocational qualifications.
The Manpower Services Commission has considered the pilots and last week the commission endorsed the report of a working party on the shape of the new scheme. We wish to accept its recommendations in full.
The commission is concerned that quality should be pre-eminent, and I agree completely. It is further concerned that quality should dictate the speed of any extension, and I again agree, as I agree that qualifications from recognised examining and validating bodies must be part of every individual programme. Indeed, these will be conditions of the job training scheme which will be available for people who come to their first six-month restart interview.
The reskilling of Britain is vital if we are to maintain our current economic progress and achieve the decline of unemployment. We have therefore decided that the new job training scheme should be expanded on a national basis to coincide with the extension of the restart programme from March this year provided that the Manpower Services Commission can maintain quality in each area. With that very important proviso we will ask the Manpower Services Commission to provide up to 110,000 places by September of this year. This will mean that in a full year nearly a quarter of a million unemployed people will be given high quality training in skills that will enable them to compete, and to compete successfully, for jobs in today's labour market. This will offer a fresh start in particular to the under-25s. They must be our priority.
I have visited too many areas with high unemployment and heard too often many employers complain that they cannot find people with the right skills. I hope that this new training measure will play a major part over the next few years to provide the skills necessary to maintan our place in the world. It will, if the Manpower Services Commission can maintain the necessary quality of provision. I have every confidence that it can achieve that.
The job training scheme is for adults. My third announcement concerns young people. We are already ahead of most other countries in the steps we have taken in the last four years to train school leavers, but there is a further step that I can announce today. The successful introduction of a two-year YTS last year enabled us to guarantee a place to every unemployed 16-year-old school leaver. Indeed, this year out of 475,000 school leavers, only 2,376 were still awaiting the offer of a place on this training programme by Christmas.
We therefore now propose to extend the guarantee of a place to every unemployed 17-year-old school leaver. This will mean that each and every unemployed young person under the age of 18 is now guaranteed high quality training leading to a recognised qualification. This


guarantee is unequalled by any of our principal competitors. For the first time, from this Easter there will be no unemployment under 18 and anyone under that age who remains unemployed will have chosen to remain unemployed.
Finally, there will be a further increase in the enterprise allowance scheme which is our scheme for subsidising the first year of self-employment for someone previously unemployed. Over the last three and a half years more than 200,000 unemployed people have started to work for themselves under this programme. Self-employment is rapidly increasing in all parts of the country. Far from a north-south divide, I might point out that the increase in the number of self-employed since 1979 has been greater in Yorkshire and Humberside—77 per cent. —than it has been in any other region. The 43 per cent. increase in the northern region is close to the 46 per cent. increase in the south-east.
We are presently expanding the enterprise allowance scheme towards an annual target of 100,000 unemployed people setting themselves up in business. We are raising that target and next year it will be increased to 110,000—an expansion of 10 per cent.—but here again we shall be asking the Manpower Services Commission to pay attention to quality and to the amount of help the new business men and business women will have to help them succeed.
The measures we have announced today constitute a major redirection of our labour market programmes to help the unemployed back into real jobs. Unemployed people need practical help to get back into work, not empty promises to create millions of jobs on local authority payrolls. They need help and training to compete successfully for the jobs which are already becoming available. We need to have a work force with tomorrow's skills to compete in tomorrow's world. That is what these new measures will help accomplish, and I commend them to the House.

Mr. John Prescott: The House and the country will be in no doubt that a general election is near, following this further example of a Government who are obsessed with reducing unemployment figures rather than creating real jobs. Not one real job is proposed in the package announced this afternoon.
The Government's statement must be seen against today's political background and seven years of Tory policies on employment and training. Despite the many fiddles with the unemployment figures, the registered unemployed total stands at 3·25 million, with 30 people for each vacancy and with the worst trained labour force of any developed economy—[HON. MEMBERS: "Get to the point."] That is what I am doing. A major deskilling of our labour force has occurred since 1979, with this Government abolishing 16 of the 23 training boards and closing 30 of the skillcentres. That has contributed to a massive shortage of every sort of skill in this country, and has affected very many of our companies, based on the evidence that they have given.
Training is regarded by many companies as a cost rather than an investment, with the result that we now have a deplorable record of expenditure on training

compared with our major competitors. They invest seven times—even as much as 14 times—more than Britain on the training of their labour forces.
This much-heralded job training scheme was born at the Tory party conference last October, much to the amazement of the Manpower Services Commission, and is built on a training pilot scheme that affected 10 areas in the United Kingdom and involved 1,000 people. There was little assessment in the 10 weeks that it operated before now being launched into a scheme affecting 110,000 places in six months—twice as many as the MSC thought it could handle. Is the Paymaster General convinced that those places, even on the terms that he set out, can be provided by industry under present circumstances?
I must make it clear immediately that, of course, we welcome the counselling and advice that are given to the long-term unemployed. I have suffered periods of unemployment — [HON. MEMBERS: "You soon will again."] — that have not been suffered by Tory Members. We welcome any advice that can be given—[Interruption.]

Mr. Speaker: Order. This is an important statement of great interest to the House.

Mr. Prescott: We are used to Tory yobbos in the House by now, Mr. Speaker. The debate is being broadcast on the radio and the electorate can judge who is giving serious consideration to the problems of the unemployed.
The restart programme is largely about marshalling people into dead-end schemes of limited effect. Can the Paymaster General confirm that the estimated 250,000 places in one year, which he mentioned in his statement, can be found? Can he estimate the effect that he thinks the scheme will have on the figures for the registered unemployed?
Secondly, what is the estimated cost of the schemes, and will extra resources be devoted to them? Can he assure us that they will not be at the expense of the existing alternative training schemes, as the expansion of the youth training scheme was at the expense of the adult training schemes?
What level of allowance is to be paid to people on the schemes? Are we correct in believing that it will be precisely the same as the levels of benefit? Will it include, as the MSC report requested, at the very least out-of-pocket expenses and help with extra training requirements for the individual?
Are these job training places now to be provided at half the cost of the existing community programme, thus breaking any attempt to adjust payments to proper levels of pay? [HON. MEMBERS: "Read it again."] The community programme made a clear commitment to bear some relationship to trade union rates of pay. Nothing in the scheme bears any resemblance to such pay and it is a major step to the workfare programme for which many Conservative Members have been calling.
Will the schemes be compulsory? Will there be a loss of benefit to those who are offered places on such schemes, or will they be allowed to take alternative employment schemes which pay more than these schemes without facing penalties?
Is not the limited six hours a week for job training on a six-month scheme completely inadequate to make any contribution to the high quality training, as the Paymaster General has claimed? Will more resources be made


available for monitoring the schemes and for judging the qualifications and standards achieved by them? What are the estimated effects of—[HON. MEMBERS: "Get on with it."] The Paymaster General made a lengthy statement which raised many questions which I am entitled to ask. I hope that I will be given time to ask those legitimate questions to which not only we but the long-term unemployed want replies from the Paymaster General.
Finally, it is typical of the Government's arrogance to assume that jobs provided by local authority services, such as house building and helping the mentally handicapped and old people, as in the statement about local authority jobs, are simply a payroll contribution. They are as real as the jobs done by anyone working in industry. However, that shows the true political nature of the statement, which cruelly exploits the desire of the unemployed to have work. It does nothing to reduce the deskilling of our labour force. It is one further attempt to massage the unemployment figures downwards and it is a major step towards an industrial conscripted labour force working solely for their meagre benefits.

Mr. Clarke: At one point the hon. Member for Kingston upon Hull, East (Mr. Prescott) read a prepared part of his question explaining his concern about the level of training and skill in our economy.

Mr. Barry Sheerman: The Minister read his.

Mr. Clarke: He obviously accepts, as we do, that we need to improve our record of training, that in some parts of Britain and in some industries skill shortages are emerging and that some of the unemployed need further training to polish up existing skills or to acquire new ones to improve their chances of entering the labour market.
Therefore, I cannot for the life of me understand why he cannot bring himself to welcome the announcement of a major training scheme, aimed particularly at the under-25s, providing on-the-job and off-the-job training in specific skills for those who have been out of work for over six months.
The hon. Gentleman asked me a number of questions about the way in which the scheme will work. Perhaps I shall be able to reassure him because I think that the scheme will, on the whole, receive a widespread welcome in industry and among the general public. First, he asks whether the places can be provided. He is apparently worried about our setting a target—it is a target—of 110,000 by September. Of course, that is quite an ambitious target and we shall achieve it only if we have a good quality scheme and maintain that pace of progress. A quicker rate of progress was achieved when YTS was first introduced. In the first eight or nine months of the YTS programme, 400,000 places were provided. We are proceeding at a slower rate than that. We have a good flow of managing agents coming forward to take part, a good flow of employers who are interested in the scheme, and of bodies that are responsible for qualifications. We believe that we must go ahead and aim at that sort of figure, and I am confident that the MSC will get there.
The hon. Member asked about the cost and the extra resources. Obviously, the cost of the YTS programme depends on the extent to which we achieve the rate of progress that the Government would like to see. If we reach the sort of figure that I am talking about, the cost will be about £200 million, some of which would be

switched from programmes elsewhere and will therefore be new money to the Manpower Services Commission. Some of that money will be found by switching funds within my Department's budget. [HON. MEMBERS: "How much?"] My Department is spending £4 billion on schemes of one kind or another, £3 billion of which is spent on schemes run through the MSC. [HON. MEMBERS: "How much new money?"] For the MSC that figure is over £100 million.
I know that Opposition Members are stronger on the amount of money that they wish to spend than they are on how they should spend it. They are committed to a £6 billion programme, but they have not explained how on earth that is meant to take 1 million off the unemployment figures. We are talking about new resources for the Manpower Services Commission and that will be achieved by switching resources within Government. That is how we shall proceed.

Mr. Frank Cook: More window dressing.

Mr. Clarke: The level of allowance received by each trainee will depend on his personal circumstances, because we shall ensure that those people who are at the moment receiving benefit will not lose money as a result of going on to the scheme. Therefore, as the level of benefit will vary, so will the average available allowance, which will be equivalent to the benefit that trainees were getting. The amount received by a young single man, will differ from that received by a married man with children who is a householder. In answer to the hon. Gentleman's query, there will be an addition for travel and out-of-pocket expenses incurred by those who take part in the scheme.
The hon. Gentleman also asked whether there would be any element of compulsion. There is no element of compulsion in any work, or training scheme in this country. We wish to encourage those who come to the restart interviews to go on to the scheme. Nobody will lose his benefit entitlement solely as a result of refusing to go on the job training scheme. As we have had to explain on previous occasions, it is true, in this as in every part of the employment world, that people who continue to receive benefit must demonstrate that they are available for work. That has always been the rule.
The hon. Gentleman was concerned about the quality of the training and the amount of knowledge that could be acquired in six months. Of course, some skills can be acquired and tested in six months, but others require longer. We are now moving over, not only in this scheme but generally, to training based on a measurement of standards, rather than time-served training. Of course some standards cannot be achieved in six months, but one can take a step towards those standards and devise skills tests suitable for the scheme, if existing skills tests cannot be accomplished within six months—but many can.
We are in contact with the agencies that determine qualifications, such as the Business and Technician Education Council, the Royal Society of Arts, and the City and Guilds of London Institute, which will welcome this announcement wholeheartedly. We shall discuss with those bodies how the training course can achieve a quality that will lead to a recognised qualification, or to a step that is definitely towards qualifications, in the period that we are discussing.
The hon. Gentleman also asked about the effects Of the scheme on the unemployment figures, which features so


largely in the barracking from his hon. Friends. Its effect on the unemployment figures will depend on the extent to which we successfully continue to reduce unemployment. It is a sad truth, from the point of view of Opposition Members, that, as the number of unemployed people steadily reduces, the figures go down. I realise that Opposition Members are worrying as the election gets near. [HON. MEMBERS: "They are on schemes."] If Opposition Members are asserting that the growth in new jobs in the economy and the reduction in unemployment are directly related to our schemes, they are grossly exaggerating the size of the Department of Employment's schemes, and their mathematics is gravely in error. I did not give my statement a political tenor.

Mr. Sheerman: As if you would.

Mr. Clarke: It was the hon. Member for Kingston upon Hull, East who mentioned the run-up to a general election. It is quite clear to me that, in the run-up to a general election, Opposition Members are getting into a desperate panic about the obvious reduction in unemployment figures, to the extent that their only reaction to employment and training measures is to attack each and every announcement that we make, simply because they are frightened that we are demonstrating that unemployment is now going in the right direction.

Mr. Peter Thurnham: I welcome the fact that existing funds are being used more productively for these positive measures. Is my right hon. and learned Friend aware that the job training scheme in Preston, contrary to what the hon. Member for Kingston upon Hull, East (Mr. Prescott) said, has been so successful that everybody who wanted a place was able to get one, and a job afterwards?

Mr. Clarke: I quite agree with my hon. Friend. I think that the people of whom we should take notice are the unemployed who need help to get back into work, and employers who are happy to train people. We should take their opinion and experience, and not that of a panic-stricken Opposition. We have found in our pilot areas no lack of people who wish to be trainees on the course. Nor did we experience any lack of managing agents or employers who are willing to provide the training required. It is the success so far of the pilot schemes that has led us to say that we must go national as quickly as quality allows.

Mr. Malcolm Bruce: Is the Paymaster General aware that we share his anxiety at the skills shortages which are emerging in the United Kingdom? To the extent that the scheme will help solve that, we welcome it. It will also provide some outlet for the long-term unemployed.
The Minister will be aware that there is worry and scepticism about the value of such training schemes in terms of meeting skill requirements and providing long-term jobs. Can he therefore give an assurance that the MSC will not advance these schemes simply to meet Government targets if it cannot be assured that they are meeting proper skill and training requirements? Can he give an assurance that unemployed people will not be forced into schemes which they do not think are relevant to them? Can he assure us that they will not suffer any loss

of benefit in those circumstances? Will he explain why the Government can find substantial sums of money for training schemes such as this when they are cutting aid to industry and regional development grants, which would help to create the new industrial base and jobs that would help the unemployed in the long term?

Mr. Clarke: I think that I can give the hon. Gentleman the assurance that he asks for in the first part of his question. I agree that it is important to emphasise that we are offering unemployed people training which is of genuine use to them and a potential employer. It is important to realise that the training will be geared to the individual's needs. The person concerned will be assessed—his or her needs will vary considerably according to educational attainment, the level of skills that have been achieved and the type of previous job. Each person will be offered a place for a varying length of time. It might be three months or as long as 12 months. Six months is an average that we have in mind.
Each training programme will be geared to the needs of the individual and aimed at a qualification which, I accept, may not always be achieved, but the idea is that there will be a recognisable marked step towards a qualification. It will be attainable by the individual and useful to him. We agree with the MSC that we should go ahead as quickly as achieving that level of quality requires.
I note the hon. Gentleman's comments on other Government programmes to bring new investment and industry to the regions. I agree that they are important. We have cut spending in that area because we have targeted it more sensibly. We have concentrated on jobs and chosen not to subsidise capital developments everywhere, which was always wasteful and ineffective. We are now getting near to having doubled expenditure in real terms on training and employment because we give it a very high priority.

Mr. Ralph Howell: I congratulate my right hon. and learned Friend on this most excellent statement. It will be well received by people throughout the country. I congratulate him on being able to offer a new training scheme place to everyone aged under 18. Will he explain why we are to continue to give people who turn down such a place the option of drawing benefit? I congratulate him on the success of the restart scheme. Will he consider urgently the introduction of a pilot workfare scheme?

Mr. Clarke: I agree with my hon. Friend about the public reaction to the announcement. There will continue to be incredulity outside the House at the reaction of the Official Opposition to such an announcement. Anybody aged under 18 who says that he is unemployed after this measure has been introduced has decided of his or her own volition to be unemployed and not to take a training scheme place. Certain benefit arrangements already apply to youth training scheme trainees, but I do not think that it is right to say automatically that somebody should lose benefit just because he or she declines to take part in a scheme. It is important to emphasise that anybody who continues to claim benefit has to continue to demonstrate, as Parliament has always required, that he or she is available for work and is taking active steps to find it.
As for my hon. Friend's advocacy of workfare, he knows that I am not persuaded that it would be right to start providing programmes for
unemployed people as a


condition of receiving benefit. We are offering extremely attractive training schemes and work experience, and I cannot believe that sensible people will continue to turn them down. All the evidence suggests that, with YTS, the number of 16-year-old school leavers who choose to stay out of work now is very low. The number of unemployed school leavers by Christmas this year was far lower than in previous years.

Several Hon. Members: rose—

Mr. Speaker: Order. I remind the House that this is an Opposition day and that a very large number of right hon. and hon. Members want to take part. I ask for brief questions, please.

Mr. Ron Leighton: Would the Paymaster General give an account of his recent meeting with the MSC? Can he confirm that it went to see him to express its concern and reservations about the standard of training in the job training scheme and about the speed at which he wants to produce it?

Mr. Clarke: The Manpower Services Commission has written to my right hon. and noble Friend the Secretary of State setting out its views, and he has written back agreeing about progress under the JTS. The MSC endorsed the report of its sub-group, which asked for an extension of JTS, saying that it should be extended as quickly as quality allows. That is the arrangement on which we are proceeding.
We are in complete agreement with the MSC in the correspondence that we have had, subject to one or two Trades Union Congress reservations about the level of allowances. We are, however, in agreement on JTS. That includes the TUC commissioners who are Ron Todd, Roy Grantham and Ken Graham—not insignificant figures in the Labour movement. I find it difficult to engage in this exchange of correspondence with the MSC and then come here and meet a band of hooligans carrying on about everything that we propose.

Mrs. Elizabeth Peacock: May I thank my right hon. and learned Friend on behalf of people throughout the country, and especially people in my constituency, who will welcome this news? We recently had an opportunity to see more than £20 million of investment in manufacturing in my constituency—and we need the skills to go with it. Many people will welcome the opportunity to take part in a training course which will lead to a recognised and approved qualification. All will welcome the fact that £100 million will be spent on training rather than on keeping people at home.

Mr. Clarke: I am grateful to my hon. Friend. I was with her in her constituency yesterday visiting two firms that are engaging in major investment and expansion.

Mr. Prescott: It is a marginal.

Mr. Clarke: It was a marginal seat in which a great deal of investment is taking place. New jobs are being created. The choice for an unemployed person is between being paid benefit for doing nothing and being paid an allowance for good quality training. I have no doubt that most unemployed people know which is in their best interests.

Mr. Hugh Brown: Which industries in Glasgow and the west of Scotland are suffering from skills shortages?

Mr. Clarke: I agree that skill shortages are most acute in parts of the south and the midlands. The shortage tends to be limited to certain industries further north. In areas that have suffered rapid change, particular skill shortages are found. There is no general skills shortage in west central Scotland, but one can find employers in all parts of England—I have not been to that part of Scotland for about 12 months—who cannot find people with certain skills.
Employment is increasing throughout the country and unemployment is falling. The skill shortages that are obvious already in the south-east will become more apparent elsewhere. In the 1990s we shall obviously require a more skilled labour force than we had in the 1950s and 1960s. It is a positive policy to raise the level of skill of those who have been out of work for six months or more so that they are more able to take the jobs that are emerging. In doing so, we shall provide a much more skilled work force for future generations.

Mr. Michael Hirst: May I urge my right hon. and learned Friend to disregard the Opposition's pathetic reaction? They seem always to denigrate every effort that is made to improve skills and job prospects. May I welcome the further expansion of the enterprise allowance scheme? Does he agree that this will give young people especially the opportunity to acquire skills and to go into business on their own account?

Mr. Clarke: I realise that we have many schemes and that their numbers become bewildering. Through our Action for Jobs campaign we try to present the differences between them. Of all the schemes, I commend the enterprise allowance scheme most firmly to overseas visitors and to others. It is the most successful scheme and it has enabled many to set up in business on their own account. The majority of them survive and go on to provide jobs for others. For every 100 people we subsidise who go into self-employment, about two or three years later there are 190 jobs in the economy that are not being sustained by public funds. That is why we are expanding so rapidly. The scheme supports the welcome growth in self-employment in our community.

Mr. Ernie Ross: I represent a part of one of the areas that has been involved in one of the pilot projects for the scheme. Having listened to the Minister and having had experience of the pilot project in Dundee, it seems that there are two different worlds. It is clear that the Minister does not live in the world of which Dundee is a part.
Is the right hon. and learned Gentleman aware that our experience in Dundee is that the scheme was introduced far too rapidly to allow the necessary liaison that was required between trainers, the unions and the possible employers? The only real employment that we in Dundee see in the immediate future lies in the numbers of those who are looking for places whom the skillcentres will have to take on. The Minister has talked about an expansion of 110,000 places, but I suggest that when he returns to this issue in two or three months, he will confirm that only those who were looking for places were taken on. Experience in Dundee shows that he has succeeded only in dramatically reducing—from 12 to one—job choice or the menu that could be offered to unemployed 18 to 25-year-olds. He has ensured that it is no longer possible to offer the community


programme or the restart scheme to these people. Dundee's experience is that the Minister's offer is not a very good one and is not a real improvement.

Mr. Clarke: Over 1,000 people are engaged in the pilot projects for the job training scheme and they appear happy with the training that they are receiving. About one in six drop out, some for the good reason that they have obtained a job elsewhere or have been taken on by the employer who began to give them on—the—job training. Our experience in Dundee and elsewhere does not match the hon. Gentleman's description. We shall have to ensure as we go along that we achieve quality and maintain it. I accept that some wrinkles may have to be removed.
The hon. Gentleman has said that there was not time for liaison between the unions, the trainers and the employers. The House will recall that the hon. Member for Kingston upon Hull, East contended that we were proceeding at a terrible rush. It should be understood that the unemployed are facing a serious problem and that, if someone has been out of work for six months or more, he will consider unemployment to be 100 per cent. It is obvious why the Opposition wish to delay making progress. They seem suddenly to have lost their sense of urgency in tackling the unemployment and training problems.

Mr. Geoff Lawler: Does my right hon. and learned Friend agree that all the evidence is that most young people would rather do something useful with their time than spend it idly? This means that the extension of the JTS will be welcomed. Does he agree that the description of the YTS as a dead duck by the hon. Member for Kingston upon Hull, East (Mr. Prescott) shows how out of touch he is with the views of trainees and of young people generally? There are skill shortages in Bradford, for example, where there is above average unemployment. There is a shortage of joiners, skilled sewing machinists and Asian chefs. Will my right hon. and learned Friend seek to ensure that JTS placements are sensitive to the needs of the local economy?

Mr. Clarke: I agree with the first part of my hon. Friend's question. I declined to enter to into a discussion with the hon. Member for Glasgow, Provan (Mr. Brown) about his constituency in the west of Scotland, and I am grateful to my hon. Friend for using his knowledge of Bradford to explain what the problems are there. It is an essential feature of the JTS that the employer provides on—the—job training. This helps to ensure that training is provided in areas where employers feel that there will be scope for employment. It is training that is aimed at the jobs market in the locality. I agree with my hon. Friend that that is a vital feature of the scheme.

Mr. Allen McKay: Will the Minister assure us that none of the schemes will be used as a source of cheap labour? If they were used in that way, they would be killed stone dead. I admit that some of those who are participating in the schemes are happy with what they are doing, but I am concerned about the training element. I trained for seven years, during which time I was seconded to various places. I was given day release and I participated in sandwich courses in training for a skill. For what skills will people be trained in the

Barnsley area, when there is currently 22 per cent. unemployment and a decline in traditional industries? What has the Minister in mind for the area?

Mr. Clarke: I have already said that the allowance will be set at a level that will not cause a loss of income for any of those who take part in the scheme. It will include travelling expenses for example. The quality of training will depend on the particular skill, how long it will take to acquire it and how the training is organised. We shall begin by designing a training programme for an individual. Depending on the skill involved, some individuals will achieve proficiency in six months. Others will be taken in the direction of a good qualification in six months.
We shall be considering with the RSA, BTEC and all the other validating agencies how we can ensure that the scheme produces a level of skill or is a worthwhile step towards a qualification that can be attained with work experience afterwards. The seven years that the hon. Gentleman spent training for his trade is not the norm in obtaining trade skills. There are many skills in the economy that can be learned in the way that I have described.

Mr. Paul Marland: Does my right hon. and learned Friend agree that there are two aspects of this afternoon's proceedings that should be much more widely known outside the House? First, before his important statement, there was only the meagrest handful of Labour Members in their places. Secondly, Labour Members have shown breathtaking contempt for well tried and tested training schemes.

Mr. Clarke: I agree with my hon. Friend, but the few Labour Members present include some of the noisiest. I have no doubt that they are able to make up for the absence of their colleagues.

Mr. Martin Flannery: This a serious subject—[Interruption.]—despite the laughter that is coming from the Government Benches. I want to ask the Minister, if Conservative Members will be quiet and listen to what I consider to be a reasonable question, whether he and some of his colleagues who are making all the noise will visit the great industrial cities of the morth to see the extent of the brutalising and terrible unemployment that the Government have created, and try to understand the pervasive cynicism that dominates young persons who are out of work towards the umpteen schemes that have been introduced to take them off the unemployed list so that they can be treated as working people? Does the Minister realise that we understand that this is obviously another method of massaging the unemployment figures, no matter what he says, that everyone knows this except those who are blind and those who will not accept it, and that there is no hope of getting young people back to work by this means.

Mr. Clarke: I was in one of the great cities of the north yesterday.

Mr. Flannery: Come to Sheffield.

Mr. Clarke: After leaving Batley and Spen, I went to Leeds, not Sheffield. I announced support for a new venture capital fund for inner-city businesses, I provided money to enable some training and work experience to start, based on the Jamaica Society headquarters, and I financed a training scheme for youngsters who get into


trouble. I realise the scale of the problems and so do my right hon. and hon. Friends, many of whom, like Labour Members, represent our great northern cities.
I agree with the hon. Member for Sheffield, Hillborough (Mr. Flannery) that one of the problems is cynicism. There is an element of opinion that takes the view:"Oh! It is all a waste of time," They say that it is all PR, all a con trick and that nothing can be done by the schemes. The Labour movement in Sheffield, and some parts of the Labour movement elsewhere is responsible for encouraging that feeling. They tell people to march behind the old banners and listen to the music of the old bands. They come here to barrack the training schemes. Unemployment is falling more quickly in the north than in the south and eventually the cynicism of the Labour movement in those great cities will be exposed.

Mrs. Virginia Bottomley: Will my right hon. and learned Friend confirm that, in recent years, a series of reports from the MSC and NEDO have consistently highlighted the need for further job training to improve our skills base? Does he agree that anyone with a serious interest in the future of our industry and a true concern for the needs of the unemployed can only regard those sniping jeers of the Labour party as showing a callous disregard for the needs of the unemployed and the needs of industry?

Mr. Clarke: I agree with my hon. Friend. In addition to our job training schemes, we must press employers and others to step up our training efforts in other ways. We must improve our record in adult training and today's announcement heralds an important new scheme that will give training to those who have been unemployed the longest and need it most.

Mr. Greville Janner: How much new money do the Government intend to pout into this scheme? Surely the answer is that they intend to spend no new money. Is it not right that this scheme, like so many other Government schemes will reduce the number of people on the register of unemployment without creating even one real job or even one real apprenticeship?
If there is no new money and if there is no reduction in true unemployment through the creation of jobs, is this not just one new string on the Government's election fiddle —to be recognised precisely for that by the electorate?

Mr. Clarke: The total level of public expenditure will not be raised by today's announcement. New money has been given to the MSC; it has been switched there from other programmes and other departments. It is quite absurd for the hon. and learned Gentleman to argue that, unless one increases public expenditure as a whole, nothing has been done.
I said earlier that the empty hole in the middle of Labour party policy is that it is extremely clear that the party will borrow £6 billion to finance its employment measures but it cannot explain what those measures will be. The only measure of which we are aware is the Southwark scheme. Perhaps the Labour party intends to build upon that scheme, which provides that three quarters of all jobs to be created in Southwark will be local council jobs provided by an already over-manned local authority.
These Government schemes do not contain a job, but they steer the unemployed towards the growth in real jobs that is taking place. There are now over 1 million more

jobs in the economy than there were in 1983 and we are witnessing a steady and continuing increase in the number of jobs in the economy. The people we are dealing with today—those out of work for more than six months—are especially disadvantaged when it come to getting those new jobs, and that is where today's schemes fit in.

Mr. Spencer Batiste: Is my right hon. and learned Friend aware that the important announcement he has made today will be widely welcomed in the industrial cities of the north where this scheme and its predecessors have substantially contributed to the record job creation of the Government since 1983? Does he accept that the Labour party's clearly hysterical and negative opposition to his proposals is clear evidence that the only genuine commitment of the party opposite is a commitment to failure and hoplessness?

Mr. Clarke: My hon. Friend may have noticed that Opposition Members are getting quieter, no doubt as they reflect upon the import of this statement. No doubt Opposition Members will also reflect upon what measures they will put forward to deal with the problems. Unless they come up with something soon they may, eventually, be grudgingly driven to agree that they do approve of restart, YTS, JTS and the enterprise allowance scheme that we are expanding today.

Mr. Jim Craigen: The right hon. and learned Gentleman seemed surprised—his words—that skill shortages were emerging. Why, after seven years, have the Government's training policies got it wrong? How many of the unfilled vacancies will be filled as a result of the training policies he has announced today?

Mr. Clarke: I am not surprised by the emergence of skill shortages, as I am afraid that the history of the British economy is that, whenever we enter a period of expansion, that expansion is restrained by skill shortages. That is already beginning to happen again, especially in the south. That is why we have been pursuing the adult training strategy in recent years and have increased the number of people supported by adult training programmes, encouraged employers to expand their training efforts and introduced YTS for young people. YTS is the best training scheme of its kind introduced by any advanced industrial country for young people previously unemployed.
The scheme announced today is the latest addition to those programmes. I think that, with the change of climate in British industry, we now realise that to expand the economy we must provide the skills that are needed by industry. This scheme is a positive response to the needs of industry and the needs of the unemployed. How many vacancies will be filled depends on the success of the MSC in expanding the scheme as we wish and maintaining the quality required to produce people that industry need to fill the jobs that are becoming available.

Mr. Tom Sackville: Does not my right hon. and learned Friend agree that if Labour Members persist in attacking every new measure designed to make jobs through training places and to address the problems of skill shortages, they will give a clear impression to people outside that the last thing that the Labour party want is a reduction in unemployment.

Mr. Clarke: I always think they have got round to supporting YTS, which the TUC has certainly supported for a long time, until intemperate remarks are occasionally


made by Labour Members. I thought that the hon. Member for Kingston upon Hull, East began to say that he approved of all this counselling and advice, which is rather different from the response that he gave, two months ago, to the restart programme—

Mr. Prescott: It is the motive.

Mr. Clarke: Oh, it is the motive—he fears that we are doing the right thing for the wrong reason. I think that steadily, Labour Members will come round to understanding that no responsible Opposition party can go to an election or look beyond it by solely promising to dismantle all the employment and training schemes which it has been bitterly opposing for the past three years.

Mr. Allan Roberts: Is the right hon. and learned Gentleman aware that I am inundated with the parents of young people who are on those schemes, and indeed by those young people themselves? They come to my advice bureau and write to me every week, to complain about four things — first, the inadequate supervision; secondly, the lack of any kind of real training; thirdly—this is very serious — the exploitation of many of the young people by employers who, for instance, force them to work unacceptable overtime on the threat of being sacked; fourthly — the real thing that they complain about—the fact that, at the end of the scheme, there is no lasting or permanent job in an area like Merseyside for someone who has been through this so-called training. Why do the Government borrow money to pay the equivalent of the nation's weekly food bills—unemployment and social security benefits —and not borrow to build things like council houses which would create real jobs, provide real apprenticeships and create jobs in the private as well as the public sector?

Mr. Clarke: Within YTS, which appears to be what the hon. Gentleman is describing, we have now established a system in which training is provided only by approved training organisations. The monitoring quality of the training is satisfactory and those principles will be applied to the new JTS.
I suggest to the hon. Gentleman that it is no good getting up to produce that sort of criticism of YTS—it is somewhat out of date—and apparently suggesting, as an alternative, that there should be no training provided and where it is provided people should be encouraged not to take advantage of it. I do not agree with the idea that, in Liverpool, the only prospect for employment is achieved by giving money to Liverpool city council to build more council houses rather than adding to the skill level of the unemployed. I cannot believe that people in Liverpool agree with that idea.

Mr. Roberts: I meant Sefton.

Mr. Tony Baldry: Does my right hon. and learned Friend agree that a large proportion of the unemployed are under 25, unskilled and unqualified? Any scheme that gives people the opportunity to gain skills on employers' premises and gain real vocational qualifications must be worthy and welcome to anyone who wants to see the unemployment level come down and the number of skilled people in Britain rise?

Mr. Clarke: It is also worth bearing in mind that a minority of the people under 25 do have some skill. About

a quarter have an A-level or the equivalent, but what they need is for that skill to be topped up in a situation that will make them more attractive to employers. Those people should have a three-month training programme that would readily convert them into employable people in the local community, but, at the moment, for six months they have found themselves unemployable. That is why we have an individual training arrangement from three months to 12 months, fitted to the individual person, to try to give him or her a skill that will be useful in the labour market.

Mr. Michael Grylls: Is my right hon. and learned Friend aware that there will be a warm welcome for the expansion in the enterprise allowance scheme, which has been uniquely effective in encouraging people, often those who have lost jobs in the large-scale older industries, to set up their own businesses? The hon. Member for Kingston upon Hull, East (Mr. Prescott), in a rather snide remark, said that these are not real jobs. If he said that to those 300,000 people who have set up these new businesses, he would get a pretty dusty answer. Will my right hon. and learned Friend keep under review, under the scheme, the adequacy of the training to prepare people to set up their own firms? That, over the long term, could improve the success rate of those new businesses?

Mr. Clarke: My hon. Friend has considerable expertise in small businesses, and in particular I endorse his last point, that it is important to keep up the level of support. It is no good giving an unemployed person £40 per week and letting them run their business on their own. We have taken steps to make sure that not only the initial counselling sessions, but steady advice, are available, as that greatly improves the success rate. I agree with my hon. Friend about the reaction of Labour Members. They make wild remarks, in trying to denigrate the figures, about so-called "skivvy schemes" and the figures of those whom they say are unemployed, but ignore the 110,000 people who will run their own businesses, who, according to the Opposition, should be included among the unemployed. It rather makes clear what their intention is towards both reality and the presentation of it over the next few months.

Mr. Ivan Lawrence: Is not the miserable reaction of Labour Members to my right hon. and learned Friend's excellent statement yet more evidence that what is good news for the unemployed is thoroughly bad news for the Labour party? Will my right hon. and learned Friend take this opportunity to nail yet again the lie that is being spread by the Labour party, that the YTS and the job training scheme do not lead to permanent jobs?

Mr. Clarke: Over 60 per cent. of those who participate in YTS go on into employment. That is the average—some schemes are less successful, and some are very much more successful, and it is possible to get a good scheme with up to 100 per cent. placement from those taking part. I agree with my hon. and learned Friend that that point needs to be made, not just to win the political argument but because we do not want young people and their parents to be deterred from taking part in good schemes by political propaganda. My hon. and learned Friend will have observed that, in the political battle, we seem to have driven our opponents from the field.

Mr. Tony Marlow: Now that every 16 to 18-year-old will have the opportunity of education, training or employment, is it not mind-boggling


to every body, except for the menagerie of ostriches on the Benches opposite, that they should still have an option of state-supported idleness? Will my right hon. and learned Friend think further that 16 to 18-year-olds who are not looking for employment do really need a kick up the backside?

Mr. Clarke: We are not proposing to change the rules of entitlement to benefit, nor that the refusal to take part in the scheme should, in itself, disqualify anyone from benefit. The fact remains that Parliament has always said that people, to get benefit, must demonstrate that they are unemployed, seeking work and taking active steps to obtain it. We must insist on that, despite the fact that yet again, we are always criticised by the Labour party when we try to make that rule more effective.

Mr. Sheerman: The Paymaster General and the House know that the Labour party supports the creation of real jobs and proper skills training. However, the background of today's statement is seven years of the collapse of proper skills training, and the fast creation of schemes that have more to do with getting people off the register than with providing proper training. The register effect has been the main thrust of the Government schemes over the past few years. We know for certain that in west Yorkshire, we call those schemes shoddy, as they do not provide jobs and training. [Interruption.] The hysterical over-reaction from the marginal seats represented on Conservative Benches persuades me that the Paymaster General should answer the following questions.
He has rather evaded the first question. Have all the guarantees for which the MSC sub-group asked been met? Everything that I have heard this afternoon shows that they have not been met. There are no genuine extra resources. There is no effective monitoring, the quality will not be assured, and people will be worse off on this scheme. In the pilot areas, one of which is in my constituency, if one goes on a job training scheme, one cannot go on a community programme and get a proper rate for the job. Is that to be the case in the expanded scheme?
Secondly, why has the scheme been piloted for only nine weeks before the decision was made? Is the right hon. and learned Genteman aware that, in every pilot area that we have contacted in the past week, the people running it have said that there is chaos? There is withdrawal of labour and a resignation of supervisors because people are so discontented with the programmes.
Thirdly, will the right hon. and learned Gentleman answer this question, because it is most important? Is it not the case that, in the pilot areas, this has led to an undermining of the youth training programme and of the community programme, and that agents are fighting for placements?
Fourthly, is three weeks' training in six months' experience what the Government stand for? The mot to of the Government is, "Good figures, shame about the jobs, tragedy about the training."

Mr. Clarke: In that series of questions, I was searching to find whether the hon. Gentleman agrees with the MSC letter to us and with the recommendations of the subgroup, because that was not clear, Obviously, the hon. Gentleman cannot answer that question today. The implication was that he does. He said that we had not complied with them. I am not surprised if that is his position, because that group includes some powerful figures in the trade union movement, acting on behalf of the TUC. The MSC is an independent commission, better placed than I am to comment on the impact on its other programmes, such as community programmes, about which the hon. Gentleman makes the wildest allegations about the impact in the pilot areas. I remind him of the sub-group's report, which was endorsed by the MSC, which begins by saying:
the commission should now make arrangements for measured and deliberate extension of new JTS to all MSC Areas.
The MSC does not take the hon. Gentleman's view that we should not go ahead. It recommends that we should expand now and says that measured expansion, meeting certain requirements, particularly of quality, is needed.
My noble Friend has written back to the MSC agreeing with its letter and its recommendations, and setting a target that we believe to be realistic and compatible with its wishes and ours. That is the best test of how this statement will be judged in the light of day. That is a measure of the importance that those seriously interested in the subject attach to this. We shall achieve a good quality scheme from the base on which we are insisting.

Several Hon. Members: rose—

Mr. Speaker: I am sorry that I have not been able to call all hon. Members who are rising. I think that they were called during Question Time today.

Mr. John Butterfill: On a point of order, Mr. Speaker.

Mr. Speaker: The hon. Gentleman was called on Trade and Industry Questions.

Mr. Butterfill: On a point of order, Mr. Speaker. I accept what you say, but is it correct to curtail what is obviously a matter of great interest simply because the Labour Benches are so denuded and—

Mr. Speaker: Order. That is very unfair, because the hon. Gentleman will know that hon. Members on his side had greater opportunities this afternoon.

Girobank

Mr. Allan Roberts (Bootle): I beg to ask leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and urgent matter, namely,
Proposals of Girobank management in a secret document to build a new headquarters in the south-east of England as an alternative to the Bootle centre, causing major job losses in Bootle on Merseyside, an area with 30 per cent. unemployment.
The item is specific because the secret report exists and was prepared on the advice of the Government and the Governor of the Bank of England. It is an urgent matter because if the second headquarters for Girobank is built in the south-east of England there would be major job losses in Bootle on Merseyside, which already has massive unemployment. A total of 7,000 people are currently employed at the Girobank headquarters in my constituency and many of those jobs would disappear to the more prosperous south-east.
It is urgent because the report should be published and fully discussed, especially with the Girobank work force and unions and with the community on Merseyside and
everybody else connected with the issue. It is urgent because without a debate in the House the report could be acted upon and a site agreed in secret. That would
strengthen the major divisions that exist already between the north and the south.
It is important and urgent to have a debate so that the Government can come clean. We need to know whether it is a plan to prepare the way for the privatisation of Girobank if the impossible happens and the Tories win the next general election. The proposals are an attempt to stigmatise as militant the work force at Girobank, which has not had a major industrial dispute or strike since it was established in my constituency in the mid-1960s by my right hon. Friend the Member for Chesterfield (Mr. Benn). It is also urgent and important that it should be discussed

because Girobank is growing. It is a huge success for the country, for Merseyside and for Merseyside's image. It is important that that is not destroyed and that there are not major job losses in this hard-hit area.

Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
The proposed establishment of another Girobank centre in the south-east of England, the consequence of which could lead to the loss of up to 7,000 jobs in Bootle, an areas with 30 per cent. unemployment.
I have listened with great care to what the hon. Gentleman has said but I regret that I do not consider the matter that he has raised as appropriate for discussion under Standing Order No. 20. I hope that there will be other opportunities for him. I cannot, therefore, submit his application to the House.

BILL PRESENTED

PROTECTION OF SHAREHOLDERS

Mr. William Cash, supported by Mr. Graham Bright, Mr. Colin Moynihan, Sir Alex Fletcher, Mr. Richard Ottaway, Mr. Michael Grylls and Mr. Spencer Batiste, presented a Bill to make provision for each public company to establish a shareholders' committee, for the allocation of a director in each public company to such a committee; and to prescribe the functions of the auditor, company secretary and solicitor of each such company in relation to that committee: And the same was read the First time; and ordered to be read a Second time on Friday 20 February and to be printed. [Bill 58.]

WELSH AFFAIRS

Ordered,
That the matter of the Public Expenditure White Paper (Cmnd. 56-II) as it relates to Wales, being a matter relating exclusively to Wales, be referred to the Welsh Grand Committee for its consideration.—[Mr. Ryder.]

Leasehold Reform

Mr. Terry Lewis: I beg to move,
That leave be given to bring in a Bill to amend the Leasehold Reform Acts 1967 and 1979 to prevent the establishment of further leasehold agreements; to establish new formulae for calculating the sale value of an existing lease to an occupier of long lease residential property; to remove from leaseholders the obligation to seek permission of the ground landlord when carrying out improvements to the property; and to establish the right of long leaseholders to obtain insurance and other services from sources of their own choice.
This is the second occasion in just over a year that an amendment to the 1967 and 1979 Acts has been attempted under the Standing Order No. 19 procedure. For similar reasons to my own, my hon. Friend the Member for Gower (Mr. Wardell) made a considerable plea for reform of the Acts a little over a year ago. Like my hon. Friend, I recognise that significant improvements to an archaic law were effected in 1967 and 1979, but, as in most things, the unscrupulous and greedy always find new ways to exploit the ordinary citizen. It is that new exploitation of home owners in my constituency and in the constituencies of other hon. Members from all parts of the north-west and in Wales that moves me to try again to curb the exploiters and to return to home owners the benefits and security which they thought house purchase had given them. Equally, I want to give home owners the freedom to which they are entitled, and to protect them from exploitation which seeks to deny them that freedom.
I return to the subject of leasehold reform again today because of the activities of several estate management companies operating mainly in the north-west. I have
named two of these companies in the House recently and condemned their dubious practices in so far as they concern home owners who are leaseholders in my constituency. Since then the existence of a number of similar companies has been brought to my attention. The unacceptable practices to which I refer, therefore, are clearly taking place over a wide area.
Against that background, the starting point for any debate on this issue has to be the very existence of long leaseholds. It is ludicrous in 1987 for leaseholds originally of 999 years to he allowed to continue. It is even more ludicrous for the law to allow new ones to be created. I hope that this debate will move opinion in the House to a position where such leaseholds will no longer be seen to be acceptable.
Until that position is reached, however, many house owners are currently being subjected to varying degrees of harassment which will be deplored on both sides of the House. It is on these current matters that I wish to address the House today.
The leasehold system, as we all know, militates against the interests of the person whose equity in the land is the greatest. The ground landlord, whose financial interest is minimal, is in the strongest position in law. Unfortunately, there now appears to be a widespread growing abuse of this power. I shall explain to the House what is happening all over the north-west, affecting many thousands of home owners.
Estate management companies, many of them interrelated to each other, are buying up the leasehold interest in homes of unsuspecting owners. The first the home owner knows of that is when he or she receives a

letter and a questionnaire concerning the property. The letter is usually threatening in tone, and I have a great deal of evidence to show that these letters have caused considerable worry to the elderly, and, in some cases, much younger owner-occupiers. There is even a covert threat in some of the letters suggesting that failure to purchase the lease could render the home owner homeless.
The answers to the questionnaire inevitably lead to estate management companies demanding that the property be insured with an insurance company of their choice. That is denial of the freedom of the individual if ever there was one, and it is clearly encouraged by the archaic clauses enshrined in most of the long leases to which I refer.
The next, and potentially the most costly, demand on home owners is that improvements to the property carried out by them should be carried out only after having obtained the permission of the estate management company—at a price, I might add.
Because many home owners have made alterations to their property, the new companies holding the leasehold are demanding exorbitant sums of money for bestowing retrospective permission. To illustrate this, I should like to refer to correspondence that I have received from a person who has been caught up in the consequence of a change of ownership of his lease.
In February 1985, the person to whom I refer received a letter from the ground landlord that ownership of the lease had been transferred, by sale, to a third party—an estate management company. In April 1986 the new company wrote to the home owner enclosing the now familiar questionnaire and asking for a payment of £400 for the sale of the leasehold, plus £185 legal costs, plus of course VAT. That was on an annual ground rent of £20. In the correspondence the new ground landlords said that they were prepared to consider retrospective consent for alterations done in the past without the permission of the previous ground landlords. They then went on to say that failure to notify any alterations could result in their refusing consent, which would, they threatened, make the property unsaleable.
On 31 May 1986 the house owner wrote to say that an extension had been built in 1984 without application to the then ground landlord. On 6 June 1986 he received a letter demanding £150 to cover the company's fees for considering the question of retrospective permission being given. I am not surprised that the company also said that it was not prepared to enter into any correspondence or discussion concerning the matter. This practice might be just inside the law as it now stands, but I contend that it is a form of highway robbery. At least Dick Turpin had the decency to wear a mask.
The home owner to whom I have referred is awaiting a reply to a letter that he wrote protesting at the amount of money being demanded. He is also being harassed into insuring his own home with a company of the new ground landlord's choice. It is estimated that this will cost him an extra 17 per cent. a year on his premium.
The matters that I have raised today clearly show that many home owners are being denied the full rights of home ownership. They are being denied the right to make improvements to their property on their own terms. They are being denied the choice of insurers and are being harassed into buying the leaseholds by threats of dire consequences. In all this they, the home owners, are not supported and sustained by existing legislation.
I contend that it is now time to make changes. The House must legislate in favour of the home-owning individual if the property-owning democracy is to have any real meaning. My Bill will redress the balance between home owner and ground landlord. It will establish a reasonable figure for the sale of the lease and limit the costs involved. It will, where the home owner wishes to remain a leaseholder, free him or her from the need to apply for permission to alter, extend or otherwise improve the property. It will give the home owner freedom to choose the insurer of his or her choice.
My Bill will also give security to those who are currently being harassed, sometimes within the laws, which give them too little protection. Parliament should change that. My Bill will help.

Question put and agreed to.

Bill ordered to be brought in by Mr. Terry Lewis, Mr. Gareth Wardell, Mr. Ron Davies, Mr. Robert Litherland, Mr. Lewis Carter-Jones, Mr. Tony Lloyd, Mr. Ken Eastham, Mr. Peter Pike, Mrs. Ann Clwyd, Mr. David Young and Mr. Lawrence Cunliffe.

LEASEHOLD REFORM

Mr. Terry Lewis accordingly presented a Bill to amend the Leasehold Reform Acts 1967 and 1979 to prevent the establishment of further leasehold agreements; to establish new formulae for calculating the sale value of an existing lease to an occupier of long lease residential property; to remove from leaseholders the obligation to seek permission of the ground landlord when carrying out improvements to the property; and to establish the right of long leaseholders to obtain insurance and other services from sources of their own choice: And the same was read the First time; and ordered to be read a Second time upon Friday 3 April and to be printed. [Bill 57.]

Opposition Day

[6th ALLOTTED DAY]

The City and Industry

Mr. Speaker: I inform the House that I have selected the amendment in the name of the Prime Minister.

Mr. John Smith: I beg to move,
That this House, noting the continuing failure of the City to serve the industrial needs of the nation and concerned by the increasing evidence that the City is unable to regulate itself, urges the establishment of a statutory independent commission to supervise financial services, including Lloyd's; deplores the damage to British industry arising from the Government's complacent policy towards takeovers which, by encouraging predators, inhibits investment in capital equipment, research and development, and training; condemns the short-term perspective of the financial market which results in the denial of finance for long-term investment in British manufacturing industry; and calls upon the Government to abandon its irresponsible policies and to recognise that the provision of capital investment in manufacturing industry is essential to economic recovery.
In this debate today we focus on three interlinked and serious matters of public concern — the failure to regulate the City, the takeover mania, which provides such fertile ground for current scandals, and, the victim of both, British industry. In a challenging editorial on 15 January the Financial Times observed:
The central issue raised by the Guinness affair concerns the conduct and ethics of the City of London—it already seems clear that this is the most serious challenge the present system of self-regulation on the conduct of takeover bids has had to face. With each revelation the chances of business being allowed to continue as before grow ever more slim.
The article continues:
Self-regulation can only work if the people being supervised have a sense of obligation towards the system which is greater than their desire to win their own way in any particular case.
It thus neatly demonstrated some crucial points about the present situation from a standpoint which even the present Government could not criticise as being politically biased against them.
First, there is a very serious situation and concern should properly be expressed about it. Whatever the Governor of the Bank of England may seek to say in defensive semi-exculpation, it does concern the City of London. Secondly, it challenges the system of self-regulation which still is at the heart of Government policy. I need only quote the Prime Minister at Prime Minister's Question Time a few days ago when she said:
we should go further with the present system before we conclude that we should go to a statutory one."—[Official Report, 15 January 1987; Vol. 108, c. 406.]
I have noticed how apologists of the Government's policies have laid more stress on some statutory aspects of the Government's approach and less on self-regulation as the scandals have deepened. But, as the Prime Minister reminded us, it is still essentially a self-regulatory system and in the case of the takeover code and panel it is wholly self-regulatory.
Thirdly, the whole basis of a self-regulatory approach is that the obligation to observe and enforce the rules


overcomes the instinct for gain. No reasonable observer of the Guinness scandal could have confidence that such objectivity had been demonstrated.
We therefore argue with force and conviction that the Government should move to establish an independent statutory commission without delay. From the start the Labour party has argued that the enforcement mechanisms of the Financial Services Act were inadequate and we sought in the proceedings on the Bill to give statutory force to the takeover supervision mechanism, at present left on a self-regulatory basis.
Let us examine some of the salient issues thrown up by the Guinness affair. The most startling thought is that, but for revelations flowing from Mr. Boesky's plea bargain with the Securities and Exchange Commission in the United States, Mr. Saunders might still be riding high and one of the most audacious coups in our financial history might have been accomplished with ease and without penalty. Fortunately, as one revelation tumbled out after another, it is now clear that in the Guinness bid for Distillers a careful plot was laid and executed to gain control of Distillers by fair means or foul—clearly more emphasis on foul — and that the system existing to protect the public failed miserably.
It all started of course with the former Distillers directors who approached Mr. Saunders as a white knight—to put it mildly, an error of judgment. Not only that, they agreed to pay him the expenses of the Guinness takeover bid. The former directors of Distillers clearly did not rise to their responsibilities. Equally, the directors of Guinness—those in place at the time at any rate—failed in their responsibilities by abdicating control of their company to the ruthless Mr. Saunders. In the bid Mr. Saunders gave undertakings about a new company to be chaired by Sir Thomas Risk and undertook to locate the headquarters in Scotland. The former undertaking was incorporated in the bid under the Stock Exchange listing regulations. I raised this matter at the time with the chairman of the Stock Exchange Council who told me that the council would be satisfied with the proposal by Mr. Saunders, and his variation from his undertakings could be sanctioned by a general meeting of the company.
In my submission the Stock Exchange Council failed to exercise its responsibilities by permitting the departure by Mr. Saunders from his undertakings and allowing there to he a shareholders' meeting at which, because of his voting power — and when some of the 2·1 million missing shares were used — Mr. Saunders won with ease. The Stock Exchange Council was a pushover for Mr. Saunders.
Then the takeover panel, the apogee of self-regulation, failed to act effectively when complaints were made to it by Argyll about manipulation of the Guinness share price. That was another pushover for Mr. Saunders. At this time the Department of Trade and Industry thought it sufficient for these matters to be handled by these self-regulating organisations. Because there were no real restraints on Mr. Saunders, he and his confederates—well placed in the prestigious City institutions — were able to operate freely. An interesting insight into the prevailing attitudes is given in Mr. Gerald Ronson's letter to Sir Norman Macfarlane when he returned £5,800,000 to Guinness.

Mr. Frank Dobson: Marked "swag".

Mr. Smith: I am grateful to my hon. Friend for his apposite intervention. I quote from the Financial Times of 12 January which gives Mr. Ronson's letter in full Mr. Ronson tells us:
Shortly before January 23, 1986, a representative of eminent brokers acting for Guinness called on me to seek Heron's support for the Guinness bid for Distillers. It was explained to me that the general opinion (which I must say I shared) was that it was in Distillers' as well as Guinness's best interests that the Guinness bid should succeed. I was told that the price of the Guinness shares was likely to be distorted because the rival bidders, Argyll and/or its supporters, were believed to be selling Guinness shares short and thereby depressing the market price. I understood that with the approval of the Guinness senior management (and Ernest Saunders in particular — whose skill and integrity were always regarded as of the highest) efforts were being made to support the Guinness share price by persuading Guinness's friends to buy in the market.
In all this I naturally assumed that the Guinness senior management had had the benefit of the high quality professional advice available to it. It was, in effect, as I understood it, designed as a legitimate corrective to the tactics of the other side. I was told that in the event that Heron suffered any loss it would be covered by Guinness. This did not seem to me at the time to be in any sense unusual or sinister, particularly as it was public knowledge that Distillers itself had agreed to cover the expenses of Guinness in rescuing it from Argyll's bid. So it was agreed that Heron would give support to the extent of £10 million.
Mr. Ronson goes on to say that that support was increased to £25 million. He continues:
It was by then also agreed that in the event of the Guinness bid being successful we would receive a success fee of £5 million. These arrangements were expressly confirmed to me by Mr. Saunders. In due course our invoices were rendered in the total funds mentioned above, and these were, as you will know, paid.
I have been and wish to be completely frank. I did not focus on the legal implications of what had occurred, not did it cross my mind the City advisers and business people of such eminence would be asking us to join in doing something improper.
We know better now. The eminent stockbroker referred to at the start of that quotation is said, in the Financial Times of today, to have been Mr. Tony Parnes who is an associate of Alexanders Laing and Cruickshank. Interestingly, the Financial Times also tells us that he was nicknamed "the animal". He also acted as personal stockbroker to various persons, including Mr. Gerald Ronson himself.
The interesting phrase
I did not focus on the legal implications of what had occurred
will not have escaped notice. Many people are behind bars for failing to focus on the legal implications of their actions. Inventive though I thought I was as counsel at the
bar, that never occurred to me as a useful phrase in a plea in litigation. No doubt it will pass into the lexicon of memorable phrases, together with being "economical with the truth".
At least Mr. Ronson has confessed. But did not many others, apparently eminent or otherwise, also fail to focus on the legalities of their activities? The Guinness affair has shot like a searchlight through the present system of self-regulation and shown it to be hopelessly inadequate.

Mr. Alan Howarth: The right hon. and learned Gentleman has spent a considerable time describing to the House circumstances of alleged malpractice in the City—[HON. MEMBERS: "Alleged?"]—and those are, indeed, very important points. By contrast, he moved hastily on in an earlier section of his speech in


which he called for the establishment of a statutory independent commission. Will he be good enough to tell the House, if not now, perhaps in a few minutes, exactly what the system that he envisages would be, and precisely how and why it would work more effectively to regulate the City than the system that is currently being introduced?

Mr. Smith: If this is what the hon. Gentleman is genuinely inquiring about, he will have seen the amendments to the Financial Services Bill that were voted down by members of the Conservative party. We argued consistently throughout the lengthy proceedings on that Bill.
Since then the Guinness affair has shown how inadequate the present arrangements are. The Government's response has been to talk tough, but they have come up with one new firm proposal. The maximum sentence for insider dealing is to be increased from two to seven years. It may be that that is wise, although I should be surprised if such a sentence were ever imposed. However, it is almost totally irrelevant to our concerns. The notion that conspirators will pause in the ante-room of crime because of the possibility that they might get five years instead of two is simply not credible. For the most part, they believe that they will be undetected. They have good cause to believe that they will be undetected. On past showing, that belief is justified. What we need is not the window dressing of irrelevant sentences but an effective system of statutory regulation and detection of abuse.
In the past few days there has been rustling in the undergrowth about changes in the takeover panel and the code. Perhaps as one of his offerings today the Secretary of State will make tentative noises. I remind the House that the Labour party sought to give statutory force to the code in an amendment to the Financial Services Bill, which the Government voted down. In that context, may I ask the Secretary of State why, in 1984, rule 37 was dropped from the code? That rule prohibited anyone.
with a commercial interest in the outcome
from buying and selling shares during a hid unless approval was obtained from the panel. Such a rule seems highly apposite to the activities of Mr. Meshulam Riklis, the distributor of Dewar's whisky in the United States, about whose activities Argyll complained to the takeover panel. Needless to say, the complaint was rejected. Why was such a rule abandoned?

Mr. Anthony Beaumont-Dark: I think that most of us agree with the right hon. and learned Gentleman that some of the things that have gone on in the City are not just unacceptable but disgraceful to any right-thinking person. However, the right hon. and learned Gentleman, in looking at the Securities and Exchange Commission, assumes that those things could not happen if we had one. Mr. Boesky was unmasked after four years and Mr. Levene after two years. Why would any statutory system be any different when the crooks in our City were unmasked after a very few months?

Mr. Smith: As the hon. Gentleman knows, that was after information was received. I would not advocate something precisely the same as the SEC simply because we do not have the conflict between federal and state laws to handle which there is in the United States. Opinion has been moving strongly, especially in the more sensible parts

of the City, in the direction of an independent statutory system in the United Kingdom. I do not believe that the takeover panel and code can rest any longer on a non-statutory base. That was the point that I was addressing.
I should like to ask the Secretary of State about the scope of the Department of Trade and Industry inquiry. Will it cover the activities of the trustees of Distillers' pension fund? It is widely said that, following Guinness establishing control, the pension fund bought Distillers shares at a high price, perhaps as a way of indemnifying those who had bolstered the price at the instigation of Guinness. They bought well above the ruling share price and, of course, since then the price has fallen steeply. The losers will be the employees who are the beneficiaries of the fund. I should like the Secretary of State to tell us whether the inquiry covers that and whether the beneficiaries' losses will be made good.
Clearly, there was some sunny optimism on the part of the Government that their proposed new system would deal effectively with the City. That confidence has been waning. Let me remind the House of how that confidence was expressed as long ago as March 1986, some time before these events occurred. I draw attention to an interview that the Prime Minister gave, which is reported in The Listener of 20 March 1986. The right hon. Lady was interviewed about high salaries in the City, and the article states:
the Prime Minister herself admits: On salaries in the City, I am the first to say this does cause me great concern. I understand the resentment. And if I feel strongly about what they are taking—
note "taking"—
in the City compared to what Cabinet Ministers are taking then look at how the people who are struggling to get work feel. But I think it will change later this year when we get this terrific competition and all the fresh air in the City.
It is at least worth asking if confidence in that "terrific competition" has been justified.
I want to consider the position regarding mergers, monopolies and takeovers. The frenetic and highly profitable activity in the City has of course been fuelled by the Government's complacent policy on takeovers. The essence of the Government's approach, as I understand it, is that referrals should only be made on competition grounds and that the shareholders alone should decide the fate of important companies. The Opposition completely reject that approach. However, we observe that, even if the decision were properly left to shareholders alone, it would be difficult for them to reach sensible decisions if markets can be rigged as easily as the Guinness case demonstrates.
The Government seem unwilling or unable to grasp the fact that those affected by takeovers are not simply shareholders. Long-standing and dedicated employees and communities to whose prosperity crucial industrial companies are vital are also affected. They are often affected more directly and more adversely as these companies are suddenly taken over. That is why it is important that wider considerations including the interests of employees and the effect on our industrial economy must be included in any sensible policy on monopolies and mergers, and that is what the Opposition advocate.
The effect of unrestrained takeovers goes to the centre of some of our industrial problems. It is too easy for the acquiring company to take the takeover route as a substitute for an investment, which takes time and involves risk. By maximising short-term cash flow, funds can be found to buy up companies made vulnerable because they


have taken the long-term view. Small and medium sized companies in particular which have made long-term capital investment, put money into reasearch and development, invested properly in training, are given a low rating in the stock market. That leaves such companies wide open to the predator. Perhaps worst of all, the need to boost the share price by inflating dividend payments to keep the predator at bay deters small and medium-sized companies from taking the long-term view that the management wishes to adopt.
When takeovers absorb important regional companies, the relentless drift to the centre in Thatcher's Britain is accentuated and business confidence in the regions is totally undermined. None of these vital issues seems to concern the Government. The Government simply leave it to the shareholders and let the devil take the hindmost. Those who gain from takeover mania are the City institutions, while those who work in British industry and the communities which depend upon it frequently suffer.

Mr. Stephen Dorrell: The right hon. and learned Gentleman has described at some length what he believes to be the shortcomings of the takeover system as a discipline on incompetent or lazy managers.

Mr. Smith: Not at all. The hon. Gentleman has misunderstood me.

Mr. Dorrell: The right hon. and learned Gentleman said that he thought that takeovers would encourage short-term perspectives and weaken the possible victim companies. What alternative discipline would he propose to the threat of takeover? What discipline would he propose to encourage managments to make effective use of the assets under their control?

Mr. Smith: I find it hard to imagine that the hon. Gentleman, whose attention to these matters I much respect, was able to misunderstand what I was saying. The whole thrust of my argument is that the threat of a takeover does not act as a discipline to make management more efficient; it acts as an incentive to make management more short-sighted because management is frightened of the predator at its elbow. Therefore, it must keep a higher share price than the company would like. It was not the threat of a takeover that made Pilkington one of the best companies in this country; it was the threat of a takeover that might have caused damage to the company. It is simply good fortune that that threat has been relieved.

Mr. Dorrell: Will the right hon. and learned Gentleman give way?

Mr. Smith: No, I have already given way to the hon. Gentleman and I cannot take the risk that he will misunderstand me so comprehensively again.

Mr. Dorrell: rose—

Mr. Smith: British manufacturing industry in particular has borne the brunt of the damage caused by the Government's economic policies. Manufacturing investment, despite all the largesse of North sea oil with which this Administration have been blessed, is still 17 per cent. down on the 1979 figure. Manufacturing output, after seven years of Tory Government, is still 4 per cent. down. Our trade deficit in manufactured goods was announced today as almost £6 billion for 1986 and it is predicted to rise to £7·5 billion in 1987. I remind the House that under the previous Labour Government, in 1979 there was a

surplus of £2·7 billion on the balance of trade and manufactured goods. For the first time in modern economic history, we are in deficit in the balance of trade in manufactured goods. If for nothing else the Prime Minister will be remembered as the first British Prime Minister to take Britain into a deficit in the balance of trade and manufactured goods.
Without vital capital investment in British industry, that trade deficit will never be corrected. Nor will we create the wealth that we need to create a civilised society and to pay our way in the world. This Government have abandoned responsibility for the employment of our people. They have equally abandoned the responsibility for ensuring that industry receives the capital investment that it requires.
The figures are bad enough at present. They will get even worse as the blip caused by the ending of capital allowances works through. Those are the underlying realities behind the candy floss economy that the Government have promoted. There is a declining and debilitated manufacturing base; a deepening north-south divide which the Government do not even admit exists let alone profess to remedy; wickedly high unemployment; misery and lost opportunity for millions of our fellow citizens, including 1·25 million of our young people.
It is clear that the Government have no policies to get Britain back to work or to rebuild our industry, let alone to bring order and decency back into our financial system. At the heart of the Government's policy is a distorted sense of values. Mr. Ivan Boesky, when he was riding high, gave a lecture to business students in the United States. He told those who might have had some conscientious reservations:
Greed is all right by the way. I want you to know that. You can be greedy and still feel good about yourself.
That has, unfortunately, too obviously been taken as the motto by those favoured by the Government, those who have not only claimed but received huge salaries and also received enormous endowments from tax reductions. Their good fortune, as we have seen, has not diminished their avarice by one whit. They seek more and more, to the extent of not only bending but breaking the criminal law. It is time for others to be the beneficiaries of Government—those who work to build our industry, those who care for our people and those whose purpose it is to build a productive and decent society.

The Secretary of State for Trade and Industry (Mr. Paul Channon): I beg to move, to leave out from "House" to the
end of the Question and to add instead thereof:
deplores the irresponsible attacks on the City by Her Majesty's Opposition which ignore its massive and continuing contribution to meeting the long-term financial needs of British manufacturing industry and business and more generally throughout the country to the balance of payments, and to employment in the United Kingdom: notes that investment growth has averaged 4·5 per cent. per year during this Parliament; notes with approval the consistency of the Government's mergers policy; and applauds, in particular, its firm action in establishing a regulatory framework for the City and its determination to root out abuses.
I begin by making it clear that we utterly reject the Opposition motion. The House is by now familiar with the Opposition's attempts to paint the blackest possible picture, to run down our industries and to leap upon and exaggerate every item of bad news that they can find. In this debate, we are discussing a sector of the economy that


is not just self-evidently successful but in which Britain leads the world. To most people, that should be a matter of pride. To the Opposition, it is merely something to belittle and to undermine.
Of course I fully accept that there are serious grounds for concern, with which I shall deal later. Some of the recent revelations of what has happened in some well-publicised cases in the City are worrying and damage the City's reputation. That is agreed by hon. Members on both sides of the House. The Government are determined that each case, and others that come to our notice, will be rigorously investigated and offenders will be punished with the full weight of the law. But to portray, as some Opposition Members do, everyone who works in the City as a shark or a charlatan is offensive to hundreds of thousands of honest, hard-working people. It is grossly irresponsible and against the national interest.
No one is keener than those who work in the City to see offenders brought to book. [HON. MEMBERS: "Come on."] The scoffing from Opposition Members helps to make my point. Those who work in the City know the disproportionate harm that a few individuals can do. Unless they are brought to book, they threaten to besmirch the reputation of the City of London on which so much of its business depends.
The Opposition motion talks of the failure of the City to serve the nation. The financial services industry employs more than 1 million people; it accounts for between 5 per cent. and 6 per cent. of our entire national product; and in 1985 its earnings for the balance of payments were more than £7·5 billion. The Opposition try to dismiss that contribution as a failure to serve the nation.
It is not just the size of the financial services industry that makes it such a major asset to the country. The accumulated expertise, the range of financial services available in one place and the ability to react quickly to change and to meet the requirements of a vast range of overseas customers have made the City of London the leading financial centre in Europe. As rapid advances in telecommunications lead to a 24-hour global market in financial services, London, with Tokyo and New York, will form the triangle at the heart of the financial world—[Interruption.] I am sorry that hon. Members do not like hearing good news about the City. No doubt it spoils their case.

Mr. Kevin Barron: What are the Government doing about it?

Mr. Channon: If the House will give me a hearing, I shall explain exactly what we are doing, what we have done and what we intend to do — [Interruption.] For some extraordinary reason, the Opposition do not seem to want to hear this. They asked for the debate, but they do not want to hear the answer.
The City has already made the most of its strengths to develop itself as a world centre in several major sectors. It is already the largest world centre for foreign exchange dealing — £60 billion a day. It is the world centre for Eurobond trading, with £220 billion of new issues a year and five times that volume of trading. It is the largest centre of international bank lending, with more than £500 billion a year.
Nor is the City just a direct contributor to our national wealth. It has a vital role — here I answer the point

made by the right hon. and learned Member for Monklands, East (Mr. Smith)—in supporting the rest of British industry — [Laughter.] The right hon. and learned Gentleman laughs; that is interesting. In 1985, £6 billion of capital was raised for industry on the stock exchange; in 1986, about £7 billion was raised. The venture capital industry, which barely existed when there was a Labour Government, raised about £300 million for British unquoted companies in 1985 alone. The business expansion scheme introduced by this Government raised nearly £150 million in 1984–85. At the latest count, more than £70 billion of loans were outstanding from the banking sector to industry and commerce in the United Kingdom.

Mr. Allan Rogers: All to private industry.

Mr. Channon: Opposition Members do not like hearing this. Banks are also making available finance to smaller companies in new ways that recognise their special needs. The full range of industrial and commercial risks are insured through London's insurance markets.
No financial services industry in the world can match the scale and range of these services to the rest of industry. Many foreign firms seeking to set up manufacturing facilities abroad have been attracted to Britain because of the range of services offered by the City of London. That is the context in which the debate should be set.

Mr. Jack Dormand: Even if we accepted those figures, how does the Secretary of State account for the fact that, after eight years of Conservative Government, manufacturing investment is still 17 per cent. lower than it was when they took office?

Mr. Channon: I shall deal with manufacturing investment, but, as the hon. Gentleman has challenged me on it, he might be interested to know that output is 14 per cent. higher than the 1981 trough — [Interruption.] Profits and profitability are up — [Interruption.] When there is good news, the Opposition try to shout it down. They do not like to hear it. Unemployment is coming down, growth is going up, output is going up and exports are going up. But the Opposition scoff at that. They do not like good news.
The Opposition's behaviour on this subject has been a catalogue of hypocrisy. It was a Conservative Government who first proposed to make insider dealing illegal—in
the Companies Bill of 1973. That Bill lapsed because of the general election of 1974. There then followed five years of Labour Government — five wasted years in which they failed to tackle the problem. It required a Conservative Government to take action to make insider dealing a criminal offence in the Companies Act 1980. Having conventiently forgotten their failures, the Opposition try to make capital out of the few prosecutions that have taken place. Again, they fail to mention that this Government introduced unprecedented powers for the investigators of this crime as soon as it became apparent that convictions were difficult to obtain because of the high level of evidence and proof required. Those powers, which include the right to question witnesses on oath and compel them to answer or face punishment for contempt of court, have been described as draconian, even by the Opposition spokesman in another place.

Mr. Anthony Nelson: My right hon. Friend is right to draw to the attention of the House the many


serious measures that the Government have taken to deal with insider trading, but may I mention one area where strengthening would be welcomed by hon. Members on both sides of the House? The Securities and Investments Board, which is the new watchdog body for the City, is expressly denied the power to investigate or to bring prosecutions in cases of insider dealing. It must seem incredible to the public at large that that body, which ostensibly has those powers, cannot look into such cases or instigate actions. Will my right hon. Friend reconsider the matter?

Mr. Channon: Of course, I will consider it. I shall gladly consider anything that my hon. Friend says. He must agree that there has been no lack of effort by the Government during the past few months to bring people to book for insider dealing. Indeed, in America, our powers would be in breach of the constitution. During the passage of the Financial Services Act 1986. we heard not a word from the Labour party suggesting that they were insufficient. Moreover, we brought forward the implementation of the powers so that they took effect within one week of the Act becoming law. Royal Assent was granted on 7 November. On 14 November, I made an order which came into force on 15 November, and on the same day I appointed inspectors to investigate a case. Our powers are proving to be exceedingly effective.
In addition, last week I announced that the Government would table an amendment to the Criminal Justice Bill to increase the penalty for insider dealing from two years to seven years' imprisonment, thus making it an arrestable offence. The maximum now is seven years. When the right hon. Member for Bethnal Green and Stepney (Mr. Shore) was Secretary of State, it was nothing. In trying to attack the Government's record on this matter, the right hon. and learned Member for Monklands, East does not have a leg to stand on.

Mr. John Smith: Bearing in mind the fact that the Government inherited a Labour Bill to make insider dealing a criminal offence—I hope that that is accepted—may I ask the Secretary of State whether he takes satisfaction from the fact that, since 1980, there have been nine prosecutions for insider dealing and five convictions while at the same time there have been 138,000 convictions for low-level social security fraud? Does that reflect the Government's priorities?

Mr. Channon: No, and the right hon. and learned Gentleman knows it. He tries to attack the Government on insider dealing, but he is well aware that the Conservative party brought in a Bill in 1973, which fell at the Dissolution. Five years later, the Labour party still had not enacted it. Yet only one year after the Conservative Government came to office, insider dealing became a criminal offence. That shows that we put it at the top of the list, while the Labour party put it at the bottom. That illustrates its scale of priorities. It is easy to talk loud, but Labour did not act when it had the chance.
Our determination to stamp out malpractice and abuse has led to a concerted effort, drawing on the resources of the Treasury, the Home Office, the Law Officers, the Director of Public Prosecutions, the Bank of England, the police and the DTI. I shall not read out all the measures that we have taken in the past few years, but mention only

the Companies Acts 1980 and 1981, the Insolvency Act 1986, the Building Societies Act 1986 and the Banking Bill now going through the House.
Last week, I announced the results of Sir Patrick Neill's inquiry into Lloyd's. The Government keenly await Lloyd's response to the report. By the beginning of October last year, the fraud investigation group, which was set up two years ago, had seen 121 cases through to conclusion, resulting in 100 convictions or guilty pleas. The Criminal Justice Bill implements the great majority of recommendations of Lord Roskill's committee on commercial fraud. A serious fraud office will be set up to bring together experts from all the relevant agencies and arm them with powers similar to those available to DTI investigators under the Financial Services Act—powers, incidentally, that the Opposition now seek to weaken through amendments tabled in Committee.

Mr. Chris Smith: Clearly, the Secretary of State has not read the proceedings of the Standing Committee on the Criminal Justice Bill. The Opposition have given full support to the aims of the establishment of that office and, indeed, have secured a wide measure of agreement between the two sides represented on that Committee.

Mr. Channon: I have a list — I hope that this is in order, Mr. Deputy Speaker—of five amendments tabled by the Opposition that would have the effect of weakening the powers of this proposal. Indeed, one amendment is designed to weaken the offence of knowingly destroying documents. It is quite extraordinary that the Opposition should speak with two voices about these matters.

Mr. John Smith: As the Secretary of State appears to be happy with progress made with the fraud investigation group, will he tell us when Mr. Peter Cameron-Webb will be brought to justice?

Mr. Channon: As the right hon. and learned Gentleman will know, I answered a question of his on that very point last week. I have already been in touch with my right hon. and learned Friend, but it is a matter for the DPP, as the House well knows.
The Financial Services Act, for the first time, sets up a comprehensive and effective structure of regulation for the City. There have been widespread misunderstandings of the system of regulation that that Act creates. It has been suggested that it is a purely self-regulatory system and that the Government are proposing simply to leave it to the City to police itself. That is simply not true. The system that we are setting up is backed by a framework of laws that will ensure that the system works properly. It will be a criminal offence, punishable by up to two years in prison, to conduct investment business without authorisation. What is more, the definition of investment business has been drawn sufficiently wide to extend regulation to a number of areas not previously covered.
Secondly, rules made under the Act will carry the force of law and will give a civil remedy to anyone who suffers loss as a result of a breach. These rules will cover such matters as conflicts of interest, the content of advertisements, the segregation of clients' money and a host of other matters. If the firm concerned has gone out of business, compensation will be payable from a fund set up under the new regulatory system. For the first time, market manipulation will be a criminal offence, punishable by up to seven years imprisonment.

Mr. D. N. Campbell-Savours: rose—

Mr. Channon: I really must press on. I have given way about four times already. If the hon. Gentleman will let me continue, I may give way later.
The system of control that the Act establishes does, of course, take advantage of the flexibility and proximity to the market of practitioner-based regulation, but it is reinforced by a strict statutory framework. Indeed, on Third Reading the hon. Member for Dagenham (Mr. Gould) said that he thought it was right to strike a balance between statutory regulations and a statutory framework and a substantial element of self-regulation. The Act achieves that balance.
Of course, the Opposition have been calling for an independent statutory commission rather than the designated agency for which the Act provides. The Opposition have signally failed—with respect, the right hon. and learned Gentleman has failed today—to name a single advantage that an independent commission would have over our proposals. What matters more than any argument about the private or public sector status of the designated agency is the powers that it is given to do the job. The agency has been given those powers under the Financial Services Act— with statutory force, which means with real teeth.

Mr. Robin Cook: As the Secretary of State stands on the powers given to the SIB, I remind him of the point that was put to him by his own Back Benchers about the powers to deal with insider dealing, which he undertook to consider. When that very amendment was tabled in Committee on the Financial Services Bill his Minister resisted that power being passed to the SIB precisely because it was not a statutory agency.

Mr. Channon: The hon. Gentleman and the whole world knows that those powers are available elsewhere and are being effectively used at this time. Frankly, the idea that there is a lack of powers on insider dealing is preposterous; the House knows that very well.
The right hon. and learned Gentleman asked me about the role of the takeover panel. Of course, as the House will expect, we have given further thought to the concerns expressed about the conduct of takeovers. I understand from the Governor of the Bank of England that the takeover panel will be meeting shortly to consider changes to the takeover code and other actions to strengthen its application. I welcome that. I have agreed with the Governor that all of us in Government concerned with City regulation—[Interruption.] If Opposition Members will listen to me, they will find that I have certain things to tell them. The regulatory system that we are establishing should reflect our considerations on how we can best support the panel further in its important job of regulating takeovers. To that end, the Bank of England, my Department and the Treasury, in conjunction with the takeover panel, the stock exchange and the SIB, will be looking at four main areas. First, in the light of the panel's immediate plans, they will consider whether additional action by any of us would be helpful in relation to disclosure of material interests, indemnities and nominee shareholdings.
Company law is particularly relevant. First, we shall examine both its relationship with the code and whether it is desirable to amend the relevant provisions of the Companies Act. Secondly, we need to ensure that any

information suggesting that matters require investigation is passed rapidly to the body most able to take quick and effective action and to ensure that the investigative powers available under the Companies Act, the Financial Services Act and the Banking Bill are used to best effect to support the panel. We shall examine the arrangements for cooperation between the takeover panel, the stock exchange—particularly its surveillance department—the SIB, my Department and the Bank of England.

Sir Peter Hordern: Will my right hon. Friend give way?

Mr. Channon: If I may finish my passage on the takeover panel, I shall of course give way to my hon. Friend.
Thirdly, we shall consider how best to reflect the provisions of the takeover code in the rules to which investment businesses will be subject under the Act. Finally, at my request the Governor, with the chairman of the panel, will review whether it has both sufficient resources and adequate representation of those with responsibility for the regulation of investment business under the Financial Services Act. The panel has much more work in hand. Our aim is together to produce a package of measures that will strengthen the existing regulation, retain the speed and flexibility of the system of regulation and enable the market to operate freely and fairly. One thing that I wish to make quite clear is that the Government are determined to enforce high standards. I underline what the Governor said on Monday — if practitioners do not respect this system, we shall replace it with one that makes greater use of statutory powers and sanctions.

Sir Peter Hordern: Bearing in mind what my right hon. Friend said about the powers of the takeover panel and the additional assistance that the Government will give it, will he consider also disposing of the old system of nominee shareholdings? It is time that beneficial share owners are registered. Whatever may be the administrative convenience of having them in nominee shareholdings, it is greatly outweighed by the right of companies to know who their shareholders are. That would greatly ease the difficulties of my right hon. Friend's Department.

Mr. Channon: My hon. Friend will recall that I said that I would ask the review to examine whether additional action would be useful in relation to disclosure of material interests, indemnities and nominee shareholdings. I think that, certainly in relation to takeovers, I have covered the point raised by my hon. Friend.

Sir Peter Tapsell: When the four different areas are being examined in connection with the takeover panel, can consideration also be given to the desirability of giving statutory powers to the panel to require individuals and companies to give evidence, both orally and in writing, on oath? It is the lack of power to demand evidence on oath that has, I believe, weakened the panel. I have reason to believe that in the past its members have not always felt that they were being told the truth.

Mr. Channon: I shall draw my hon. Friend's remarks to the attention of the review body. I do not exclude any solution to the problem, and will bear his remarks in mind.
I want to say a word about mergers. The Opposition have become fond of talking about merger mania. I assume that that means that they are, in general, against


them. Indeed, the Labour finance and industry group's latest document — to which the hon. Members for Dagenham and for Livingston (Mr. Cook) contributed—calls for a merger policy that is
either neutral or has a built-in bias against concentration.
Yet it was not so long ago that the Labour party believed that mergers were the solution to every economic ill. Those of us who have been in the House a long time will remember that it even set up the Industrial Reorganisation Corporation specifically to persuade, cajole and, sometimes, coerce companies into mergers. I shall not go into the details as they are unhappy memories.
In fact, of course, mergers and takeovers are in themselves economically neutral. They are one of the main ways in which the structure of industries and the management of industrial and commercial assets adapt to changing needs. It is sometimes necessary for them to adapt. That is beyond doubt, especially at the present time of accelerating industrial and technological change.
Of course I recognise that the interests of the parties to a merger and their shareholders can diverge from those of the economy as a whole. That is why, with the support of all parties, there exist powers to refer mergers which meet the statutory criteria to the Monopolies and Mergers Commission. It is common ground, too, that mergers that significantly restrict competition may require examination.
We are urged to take a broader view and be more ready to refer mergers on largely unspecified grounds of public interest. I can assure the House that I have learnt one thing—nothing could be easier or more popular than for the holder of my office to refer each and every large and controversial merger to the Monopolies and Mergers Commission. I suspect, however, that the commission's findings would often come as a salutary shock to those urging referral. I well remember the criticism, in this House and outside, that the policy pursued by my predecessors—from both sides of the House—on merger references was arbitrary and unpredictable. I know that that view is strongly held in industry, as I said earlier.
I do not rule out the very occasional case that may give real ground for public concern that is not related to competition. The Elders bid for Allied is a case in point. It was the first major example in the United Kingdom of a high-leveraged bid involving the planned break-up of a major industrial company.
The right hon. and learned Gentleman and others underrate very seriously the value to industry of predictability in merger policy and the chaos that can result if Ministers intervene on grounds more appropriate to the shareholders.

Mr. Tony Favell: When objecting to a merger, should we not remember that often the target company has itself previously taken over companies, and that its greatness may well have come about through merging with companies less successful than itself and through taking over companies not only in this country but abroad?

Mr. Channon: My hon. Friend is absolutely right; that often happens.
The BTR bid for Pilkington, which the House will remember well, raised very serious issues of corporate philosophy and style, industrial structure and research and development philosophy. I had no basis for believing that I — or, with great respect, the MMC — was better

qualified to decide on them than the shareholders, who had every incentive to make the right long-term judgment. What I do know is that intervention by me could have prolonged for months the uncertainty which was resolved in days by the market.
Of course, the last word has not been spoken on merger policy. My Department's review of policy on mergers and restrictive practices policy will continue. I should have been failing in my duty had I allowed myself to be deflected and had referred to the MMC a merger that raised no issues of competition or of anything else riot perfectly appropriate for the shareholders to judge.

Mr. John Fraser: There are two tests in the Fair Trading Act—one is competition and the other the public interest. Why does the Minister always ignore the public interest?

Mr. Channon: Of course I must consider the public interest. I said that cases would primarily be referred on competition grounds, and that has been the practice since 1984.
The next charge that has been levelled against the City is that of short-termism. I accept that there is a serious point here, which merits less partisan treatment than Opposition Members give it. There is a widespread feeling that the major investing institutions, whose own short-term performance is closely monitored, look too much for short-term profit and under-value expenditure on research and development, training and investment. It is said that, as a result, industrial managers, fearful of the threat of takeover, cut back on such expenditure and concentrate exclusively on the day-to-day share price.
The evidence on that is mixed. A number of companies with high research expenditure also command high market ratings. The institutions do not always take the quick profit in a takeover; Woolworth's is a case in point. Many of the shareholdings of pension funds and insurance companies are kept for long periods. Often, it is the underperforming managers who feel under most short-term pressure, and that may be no bad thing.
For industrialists who are confident of their future strategy for their companies, but feel that it is not understood by their investors, I suggest that they take the advice of the chief executive of the Prudential Corporation, which owns 3·5 per cent. of United Kingdom equities:
If boards of directors have told us what they are doing, we would normally support the incumbent management in a takeover bid.
Very often, the remedy is better communication.
I warmly welcome the establishment by the CBI of its City industry task force, with the object of promoting better understanding. I also warmly welcome the work currently being undertaken by the Accounting Standards Committee with a view to producing an agreed accounting standard dealing with research and development. I hope that that will be within the year. That would require the disclosure in company accounts of expenditure on research and development for the financial year reported on.
I am less convinced by some of the more radical remedies that have been proposed for the City's alleged short-termism. Changes in the tax status of the institutions and curtailment of the rights of shareholders would have repercussions far beyond the immediate target, and the case for them has not been made.

Mr. Tim Smith: Does my right hon. Friend agree that there are double standards in industry on this matter? The director of an industrial company will say that the market is taking a short-term view of his company, but will also wear his hat as a pension fund trustee and encourage his pension fund managers to improve their performance.

Mr. Channon: My hon. Friend, as so often in these matters, has put his finger on a problem.
The Opposition motion claims that the City has failed the nation. It has not. It has served, and continues to serve, the nation well as a major industry in its own right and as a provider of a unique range of services to the rest of industry. The attempts of the Opposition to blacken its name with such phrases as "a spiv's paradise"—used by the Leader of the Opposition — and "a sleazy undercurrent of corruption" — used by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley)—are a disgrace and damaging to the nation.
I do not accept that either of those phrases bears the remotest resemblance to the truth. The overwhelming majority of those who work in the City are honest and hard-working. They are fully justified in finding such language deeply offensive. As in any profession or trade, there exists a minority of people who break the rules, and the Government are determined that they should be identified, rooted out and punished.
Last week, the right hon. Member for Sparkbrook stated in the House that the Government were
reluctant to act against City fraud".—[Official Report, 20 January 1987; Vol. 108, c. 768.]
We are used to the right hon. Gentleman's distortions and twistings of the truth, but with that statement he reached new depths. I challenge him or any of his colleagues to produce evidence of any case where abuse has occurred and the Government have failed to act. If they cannot do so, that statement should be withdrawn.
The Government are doing all in their power to protect and maintain the good name of the City. I urge the House to accept the amendment.

Mr. Ian Wrigglesworth: The House will be aware that the events of recent weeks have had considerable influence on the country's opinion of the City. It appears from the Minister's speech and from the Government's recent actions that they too have recognised this.
Before coming here I worked in the City for National Girobank and before that for the Midland Bank, and at present I advise Barclays Bank, so I have no hesitation in saying from my experience that the City plays a very important role, not only in the way emphasised by the Minister, that is, in its contribution to overseas earnings, but in providing a service to millions of people, in insurance, banking and other spheres, that is wholly beneficial. However, it is no good the City minimising the scale of what has happened. I fear, from the remarks of the Governor of the Bank of England, reported in the press this morning, that he and some others are seeking to do that. To claim, as he did in his speech to the Institute of Bankers in Scotland, that Guinness is not a City scandal is to put his head in the sand. When I consider the number of City institutions — Morgan Grenfell, Ansbacher,

Alexanders, Laing and Cruickshank and others — involved in this business, I wonder how one can describe it as not being a City scandal.
I have found, particularly among some of the older inhabitants of the City, a complacency about the current situation which is deeply worrying.

Mr. Beaumont-Dark: The hon. Gentleman is virtually accusing the Governor of the Bank of England of being complacent. Has the hon. Gentleman not noticed a letter which has gone out today to all merchant banks in which the Governor says that unless there is tighter control and self-discipline he will seek statutory powers? How can he accuse the Governor of being complacent when he says that?

Mr. Wrigglesworth: I regret that it has taken him so long to become aware that control in some of these apparently widely respected institutions is so lax as to allow the sort of things that have been happening in corporate finance divisions and merchant banks. As I pointed out in Question Time the other day, when the chief executive of Morgan Grenfell, who has been responsible for the supervision of that bank, is a former employee of the Bank of England and when the director of the corporate finance division of that bank is a former director-general of the takeover panel, I feel that I am not being unfair in saying that the rot has gone a very long way in terms of both supervision and the atmosphere throughout the City.
One need only look at the sort of remark made this morning in The Times by the city editor, Mr. Kenneth Fleet, when he says:
There is nothing new about merchant banks and stockbrokers sailing as close as possible to the wind in takeover situations
to know what I mean. This is the trouble, that everyone expects these people to "sail close to the wind." It is fairly evident from what has happened in recent weeks that they have been sailing not only close to the wind but well beyond it. We want the City to thrive and make a contribution to the economic life of our country, but many of us fear that there is a lot more to come because in the City an atmosphere has developed: making a fast buck and greed are the order of the day. This attitude is most regrettable and must be rooted out.
The whole of the recent actions of the Governor of the Bank of England raise starkly what has long been a question for me: what is the role of the Governor and of some of the other City bodies, and who is responsible for supervision? I was sorry to hear the Secretary of State say that he was drawing in the Governor in the way that he mentioned, not because of any personal antagonism on my part or anything of that sort but because I have thought for a long time — and have said so here on previous occasions — that it should not be the role of the central bank to supervise the City. We have the Banking Bill and the responsibilities clearly lie in that direction. There are others who should be responsible for the supervision of other parts of the City. It is not the responsibility of the Bank of England.

Mr. Beaumont-Dark: Why not?

Mr. Wrigglesworth: I am sure that hon. Members on the Government Benches will agree that there are others who are responsible. In my view, the supervision of the City is too fragmented and needs to be concentrated in a way that it is not planned to be at the moment.
The sort of atmosphere that has built up in the City is demonstrated by another facet of the Guinness affair. Mr. Olivier Roux, the finance director of Guinness, was paid the magnificent sum of £6,000 in director's fees for his work at Guinness.

Mr. Beaumont-Dark: Was he not worth it?

Mr. Wrigglesworth: I will come to his worth and his payments in a moment. It raises questions about how the gentleman was remunerated. We know that he and a substantial number of other members of staff of Guinness were employed by Bain and Co. to whom Guinness paid £8 million for their services. What a curious way for a major corporation in this country to behave. Has it anything to do with the taxation of the income of the people working in Guinness and other such companies? I wonder whether the payments were made in the Cayman Islands or in some offshore tax haven so as to avoid taxes here. That sort of practice is not unknown in the City and it is the sort of thing that breeds antagonism in ordinary people who do not have the benefit of tax lawyers and accountants, who make it possible for people earning very high salaries to avoid the taxes which they should be paying and which other members of the community are paying. It is all part of this rotten atmosphere that has built up in the City over a period of years, an atmosphere that needs to be changed.
On the question of supervision and the role of the Government in all this, it took five years from the commissioning of the Gower report in July 1981 for the legislation envisaged in that report to be enacted, as it was last October. It took two years from November 1983 to December 1985, after the publication of the Gower report, to consult and then to publish the Financial Services Bill. That was two years during which hon. Members on both sides of the House were pressing Ministers about their delay in bringing forward proposals following the publication of the report. It took five years to get the legislation on the statute book. It is intended to give the delegated powers to the Securities and Investments Board only in July of this year, although we hear that that may be brought forward. That is dilatory progress on this important matter. One must also take into account the fact that the former Secretary of State for Trade and Industry made a statement to the House removing the stock exchange from the action that was taken against it in the restrictive trade practices court in July 1983.
The Government bear a major responsibility for the mess that we have got. Here we are, with the big bang having taken place last October as a direct consequence of the former Secretary of State removing Stock Exchange action from the restrictive trade practices court — in order, I may say, to protect single capacity rather than to break it up, as subsequently happened—but because of the dilatoriness of the Government we have not yet got the Securities and Investments Board in action or the provisions of the Financial Services Act 1986 in force. They should have been in place before the big bang took place. It is the Government's fault that that is not the case.

Sir Eldon Griffiths: While the hon. Gentleman is on the subject of delay, does not he recall that when the Conservative Government led by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) left office, they had introduced a measure to deal with insider trading? That fell with the election and during

the next five years the Government who were in power did nothing about it. At the end of that Government's period in office the Lib-Lab pact was in place and the hon. Gentleman's party claimed that it had profound influence on the Cabinet of the day. How is it that it did so little to achieve the enforcement of that much-needed legislation and how can the hon. Gentleman complain of dilatoriness now?

Mr. Wrigglesworth: Much-needed legislation was introduced at that time. Although the history of 17 years ago may have some relevance for the hon. Gentleman, I do not think it has much relevance to the events of the last few months.
I remind the House that not only were the Government dilatory in introducing the legislation, but when they brought it to the House the original Bill was enormous, having 166 clauses and 15 schedules. So slipshod was the preparation of the Bill that the Government had to introduce 40 to 50 new clauses, make 800 to 1,000 amendments and add four more schedules. So, after all that period of gestation, the Government almost had to rewrite the Bill.

Mr. Tim Smith: rose—

Mr. Wrigglesworth: No, I cannot give way because many hon. Members want to take part in the debate.
We have ended up with competition being the order of the day in the City, with the big bang having taken place and with none of the legislation properly in place to deal with it. The Government are responsible for that state of affairs and it is deplorable that they allowed it to happen without preparing properly beforehand.
As I said earlier, one of the major problems under the present regime is that the system of supervision is too fragmented. During the passage of the legislation it was proposed that the SIB should have power to investigate and to instigate actions. In the light of recent events, I have moved considerably towards that position. As we said during the passage of the Act, the takeover panel should be brought under the auspices of the SIB and should have much greater power. It should also have greater independence. We also made it clear that it should be funded by the Government, not the City, and that it should have a much more substantial representation of lay people within it to ensure confidence outside the City in the work that it was doing.
One problem about the Department of Trade and Industry exercising the powers that it does — I accept that they are substantial, and I welcome the changes that the Government have made to strengthen them in recent weeks—is, with great respect to the Secretary of State, that this is a Government Department supervised by politicians, with some 42 inspectors working for it. I do not believe that there can be public confidence in a Government Department, particularly the DTI with the history it has had over the years in policing companies legislation, continuing to have those powers.

Mr. John Fraser: Is not it extraordinary that recently the takeover panel resisted being dragged kicking and screaming into the divisional court, saying that it was so exempt from supervision that not even the divisional court should look at it as a matter of judicial review? Is not it extraordinary that it should behave rather like a Borgia pope trying to control nepotism?

Mr. Wrigglesworth: I am not sure that I take the hon. Gentleman's analogy. Before coming to the debate I was reading the report of the takeover panel on the Turner and Newall bid for AE. If the public spotlight had been put on the activities of Cazenove, Hill Samuel and others who were rebuked by the takeover panel for their activities then, and if the takeover panel had had real teeth, we would have seen more action than just a note of censure against those City institutions. That illustrates the weakness of the takeover panel's role and why it needs to be brought within the ambit of the SIB.
I do not believe, as the Labour party believes, that Lloyds should also at this stage be brought within the ambit of the SIB. The Neill report, which has just been published, recommends that the council should have a majority of outsiders upon it. That recommendation should be implemented rapidly. I hope that there will not be delay upon that. We should see how that and the other recommendations work before making a decision to bring Lloyd's under the ambit of the SIB. Indeed, the chairman of the SIB has made it clear that he does not believe that he has the resources and the ability at this stage, with all the other responsibilities the SIB has taken on, to take that on as well. So, although I do not say that it should never come within the ambit of the SIB, at the moment it is best to proceed rapidly with the Neill recommendations, and in, say, two years, make a judgment about what should happen.
Moving to the role of the City in relation to industry, I want to say a word about monopolies and mergers policy. As I said at Question Time this afternoon, I am disappointed that the Secretary of State is not bringing forward his review of competition policy. He seemed to be satisfied with it; if he is so satisfied, what is the point of the review? We believe that there is a need for a profound change and a streamlining of the machinery. We have said for some years that the burden of proof should be put on to the shoulders of the person making the bid. We believe that the Monopolies and Mergers Commission should be abolished, as should the restrictive practices court, that individuals and organisations should have power to take action in the courts against anti-competitive practices and that the Office of Fair Trading should have a much bigger role, removing responsibility from the Secretary of State to intervene and only allowing him to overturn recommendations of the Office of Fair Trading with the support of the House.
Changes of that sort would ensure that mergers took place only if they were genuinely in the economic and public interest of the people working in the firms and the customers that they serve. That could also ensure that competition was safeguarded and that we had a much quicker and simpler system of dealing with mergers and takeovers than we have at present.

Mr. Tim Smith: The hon. Gentleman has made an extraordinary assertion about his party's policy. I know that he is not a Liberal, but it is incredible to say that every case should have to be justified in the public interests and then to say that the system should be quicker and simpler.

Mr. Wrigglesworth: I said that the burden of proof should be put upon the shoulders of the person making the bid. That would result in the public interest — the interests of the employees and the consumer — being served much better than if it was the other way round, as

it is at present. If the hon. Gentleman is satisfied with the present system, so be it but we are not. Britain does not have the competition that it should have and the way in which takeovers and mergers have been taking place in recent years has not served the interests of British industry or the nation.
There is a great problem, not in the supply of money to industry, but in the terms and conditions upon which it is available to industry. Not enough medium and long-term funding is available and the levels of interest that people have to pay and the security that they have to provide make it impossible for many firms to obtain the funds that they want. We have proposed introducing an industrial credit scheme and small firm investment companies which would help to overcome that problem which undoubtedly exists and which many in the City also recognise exists.
It is also important to see the development of regional financial services. The great contribution made by the financial services industry in Edinburgh to the Scottish economy illustrates how important it is to the regions to have a sound financial infrastructure which other parts of England, and, indeed, Wales, do not have. We should like to see the development of regional financial services, which do not exist at the moment, and which companies have to come to the City of London to obtain.
If all those changes were made, the interests of British industry would be much better served by the financial services industry than they are at present. I hope that the Government will take into account the way in which events have changed people's attitudes in recent times and the remarkable change in the City, making it necessary for much more powerful, independent and effective supervision than we have had in the past.

Sir Peter Hordern: I should start by declaring an interest. I have worked in the City all my working life, first as a stockbroker, then as a member of Lloyd's, and now as chairman and director of investment trust companies.
Perhaps the part of the debate that I have enjoyed most so far was the expression on the face of the right hon. and learned Member for Monklands, East (Mr. Smith) when, in conclusion, my right hon. Friend the Secretary of State described the activities of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and what he had to say about the City. He greatly enjoyed the situation and he was well justified.
The right hon. Member for Sparkbrook does not appear to be very comfortable either in the economics scene or in what he has to say about the City. To resort, as he did the other day, to talking about the "sleazy undercurrent" in the City does neither him nor the Opposition any good at all. The right hon. Gentleman would do much better to stick to writing articles for magazines and leave economics to his betters.
There has been some speculation that the right hon. and learned Member for Monklands, East might take the place of the right hon. Member for Sparkbrook on the Opposition Front Bench. That might be a good move. If nothing else, the right hon. and learned Gentleman is an extremely good lawyer and quite able to make the best of a poor case, and that is really all that the Opposition have had to say about the City so far. To blame the City for the activities that have occurred recently is absurd and


damaging to the Opposition. Moreover, it is surprising, because if they were ever in a position to form a Government nobody would he more dependent than they would upon the City. Time and time again Labour Governments have had to be bailed out by the City. I think that they propose to borrow several billion pounds in order to renationalise. How they can do that without the City, I do not know. However, perhaps we need not exercise ourselves too much about that, because they would inevitably fall into the embrace of the International Monetary Fund, as they have done on every occasion.
I want to say something about the place of the City and the part that it has played in our national life. The Opposition correctly talk about the loss of the share of national production and GNP in manufacturing industry. That is a phenomenon that is well known in every advanced country. Therefore, they could not be surprised at that. Indeed, any effort to retrieve that position could well be more damaging than beneficial. But what they have not done is to point to the extraordinary change which has come about in the past few years in the credit balance of our financial services.
I have available only the figures for the first three quarters of 1986, but we ran a surplus of £6·3 billion on our financial and other services at the same time as we were running a trade balance of roughly comparable figures.

Mr. Allan Rogers: Playing with money.

Sir Peter Hordern: The hon. Gentleman says, "Playing with money", and I want to take that seriously. The Labour party must address itself to the fact that manufacturing industry depends upon the import of raw materials, their conversion and final sale to other customers. The hon. Gentleman and the Labour party should consider the distinction between that and a financial institution in the City discovering that a manufacturing company in Japan wishes to raise money, raising that money in the City through its own expertise and selling that service to Japan. There is an important point here. What distinguishes that is the way in which the margin of profit can be gained in financial services which now bring, and will continue to bring, considerable benefits to Britain, and which it can be argued will displace in time to come what we can now contribute from manufacturing industry.

Mr. Rogers: The hon. Gentleman asked me to consider his thesis and I do, but at the end of the day I still do not see any increase in Britain's wealth coming from the operation that he has described. There will be no more investment in jobs or in industry. One can shuffle paper round all over the world, but that still does not create Britain's wealth.

Sir Peter Hordern: It was a mistake to give way to the hon. Gentleman and I apologise to the House for doing so. The simple point is that it is the product of financial services which also increases the profits of industrial companies, which is the motive force for further investment and employment. It is as simple as that.
I want to make one particular point about the change which has come about in the past three years. London is but one of three main centres in the world, of which the other two are New York and Tokyo. We are part of a global financial village, as it has been aptly described in

other quarters. The significance of that position may not have been generally recognised. Its significance is that we shall continue to earn a substantial financial surplus on our invisible earnings and services for years to come. It is perfectly possible now to see the position that Britain held for most of the Victorian era, when, as a result of our manufacturing capacity and our financing of world trade, we eventually had a large and continuing surplus on our invisible earnings. I see no reason at all why that position should not continue hereafter. Of course, if the Labour party were to take office it might sensibly diminish that by its proposals to bring back pension funds.
I should also like to comment on the earnings from our portfolio investments. Last year we received dividends amounting to £6 billion, compared with only £540 million in 1979. I understand that Opposition Members plan to persuade or induce pension funds to return their investments to this country. It appears to me that Opposition Members are signally ignorant of the economic process, because if that is done, and to the extent that it succeeds, it must increase the price of sterling, relative to other currencies. It follows from that that the effect would be to reduce the competitiveness of our manufacturing industry, thus throwing more people out of work and reducing investments in manufacturing industry. Therefore, that policy is a strange one altogether.

Mr. Gerald Howarth: Does my hon. Friend agree that the effect of that would be to put people out of work in other countries who have been financed from this country, leading to further calls from Opposition Members for increased foreign aid?

Sir Peter Horden: I am grateful to my hon. Friend, who is quite right. I do not wish to pursue this point any longer. I regard it as important that there has been a substantial change in our economic and trading position, which is likely to continue under good guidance for many years to come. Everyone should be aware of that. If that is to be the case and we are to keep intact our place in the global village and take advantage of the situation, the law as it affects the City must be clear and the guidance must be authoritative.
In so far as the City's activities touch upon our national life, there is a public interest 'which must be observed and protected. Although arguably we would have saved a lot of trouble if we had had an SEC, the Securities and Investments Board, with the SROs, is much more likely to uncover the sort of crooked activities that may occur than would be a full-blown SEC. However, if it is right to increase the number of nominated members on the council of Lloyd's as the new report suggested—I believe that it is right to do so—from four to eight, there is equally a case for increasing the number of lay members on ISRO from four to eight, and even, perhaps, for increasing the number of lay members on the SIB.
I do not know whether it is necessary, because my right hon. Friend the Secretary of State for Trade and Industry would be in a better position than anybody else to know that fact. However, the number of cases that are now referred to the Department for preliminary investigation make a case for strengthening the number of people in his Department.
My right hon. Friend announced some proposals that would affect the takeover panel. Plainly, either the panel should be brought into the ambit of the SIB or its powers


should be beefed up in one way or another. It cannot be allowed to continue quite as it is at the moment, without powers, nominated by practitioners themselves, in which they must have confidence, in the end. If it cannot produce any effective measures to stop the things that go wrong, some change must be made. Therefore, I welcome what my right hon. Friend said about the takeover panel.

Sir Eldon Griffiths: Does my hon. Friend agree that the takeover panel, which has done excellent work, has nevertheless lost a great measure of confidence among people in the City, the financial press and the public? In those circumstances, without pointing the finger at individuals, does my hon. Friend agree that there should be some change in the personalities at the top of the panel?

Sir Peter Hordern: The last thing that I wish to do is to make any remarks about personalities. However, the proposals that my right hon. Friend has made are interesting and deserve careful study. I hope that they will be carried through.
I intervened in my right hon. Friend's speech in connection with nominated shareholders. I am surprised that the issue has not been raised before. It is an old and convenient administrative practice. When stockbrokers or banks buy shares, they put them in the names of nominees. Very often, merchant banks or stockbrokers have a substantial number of discretionary clients and it takes them some time to work out how they are to be allocated.
Apart from that administrative convenience, I cannot now see any reason why the beneficial owners of shares should not be registered right away. That would get rid of the temptation that exists for those who want to buy shares for reasons which they do not wish to divulge from using nominee names in Swiss banks or in any other country.
In the long run, it would do my right hon. Friend and his Department a great service if that change were brought about. There may have been very good reasons for it when those nominee shareholdings were established and the matter was originally considered because the stock exchange, as I was told when I first joined it, existed for the benefit of its members and for nobody else. The existence of nominee shareholdings cannot now be justified—

Mr. William Cash: rose—

Sir Peter Hordern: I hope that my hon. Friend will forgive me for not giving way. I have already given way and I want to get on. Irrespective of whether the City is as closely involved in industry as it should be, it should recognise that it should be more closely involved.
I should like to comment on merger policy and the public interest. There has been an enormous amount of merger activity. I understand that in the first nine months of last year about £11·3 billion was spent on company acquisitions, compared with £7·1 billion in the whole of 1985 and £1 billion in 1981. It would be less than realistic to suppose that all the banks that have been set up recently and the old existing merchant banks did not make a lot of money out of merger activity and that there are not a large number of people who are sedulously seeking to promote mergers and do very well out of them.
I agree with my right hon. Friend the Secretary of State that the main test must be competition. However, one

must consider the reality of what it means to leave it to the market. As my right hon. Friend said, it is perfectly fair to mention the Prudential as an institution with shares in virtually every company in the country, and which on the whole decides to favour an existing business rather than the one that will take it over, but there are several other fund managements which take a short-term view, because, as my right hon. Friend mentioned, their performance is compared very carefully with other funds. In every sort of takeover one sees the same names involved. I have to say that leaving it to competition means leaving a large part of it to fund managers, who are bent on getting the best price for their shares, rather than on taking a long-term view.
Anyone in manufacturing industry who in 1980 had to face $2·40 to the pound, $1·09 five years later, in 1985, and $1·52 now, would have to be a genius to anticipate that state of affairs and to carry out its trade perfectly, in every respect allowing for that fluctuation. It is perfectly possible that such a company would find it difficult to resist assetstrippers bidding for it at the bottom of the cycle. Therefore, there is a public interest when hundreds of people are laid off at the behest of a tiny company borrowing on the assets of a large company that it is considering taking over.
Through the Office of Fair Trading the Government have a duty to look at aspects of takeovers apart from competition. I urge the Government to look closely at the credentials and the financial stability of those companies—often small or highly geared—which are making a bid to take over another company. The policy should not be to prevent takeovers where the business that is being acquired is likely to have more investment as a result of acquisition, rather than less, as has been suggested. The emphasis and priority should be to allow takeovers, but to be sure that the amalgamation of the two companies will not mean that more strain is placed on the two together than would have occurred before.
It is necessary to secure an identity of interest between industry and the City if the public interest is to be served. I greatly regret the tone in which the Opposition have launched the debate. The City has served the country well for many years and will continue to do so.

Mr. Brian Sedgemore: I shall try to be brief. One of the problems with our debates on the City is that they are getting wider and wider, so our speeches have to be ever more truncated.
I did not think that I would, but I agreed with what I thought were three interesting aspects of the speech made by the hon. Member for Horsham (Sir P. Hordern). I believe that there is a problem with the repatriation scheme that the Labour party has proposed, the level of sterling and competitiveness. That worries me slightly. I entirely agree with what he said about nominee shareholdings, and I would not disagree with some of what he said about mergers.
The Secretary of State was a grave disappointment to the House. He was credible for a couple of sentences and then my hon. Friend the Member for Easington (Mr. Dormand) asked him a simple question—if there are all of these investment funds, what has happened to manufacturing investment since 1979? It seemed a perfectly straightforward question. I understood it.


Instead of talking about investment, the Secretary of State spoke about output and compared output with what had happened in 1981, not 1979.
The Secretary of State has had a lifetime in business. He is the top person in Government. Let us suppose that he goes to sit an O-level examination in economics and the first question is, "What has happened to manufacturing investment since 1979?" He begins his answer, "Far be it from me to be so invidious as to discuss what has happened to manufacturing investment since 1979, but as for manufacturing output since 1981…" The examiner would not mark the paper. Such behaviour is not helpful to the House when shrewd observers such as my hon. Friend the Member for Easington intervene.
I do not think that the Secretary of State has read the figures about investment properly. If we ask who are the investors in Britain, the answer comes back that they are not rich individuals, banks, insurance companies or pension funds. The statistics of the past 20 years, as opposed to those of the past year, show that the stock exchange, which is sometimes described as the source of capital for commercial and industrial companies in Britain, has, on average, provided 5 per cent. of industrial capital annually.
The banking sector has done rather better. It has provided between 20 and 25 per cent. of the capital that commercial and industrial companies need. The real investors are the customers. Although it is described in the City as equity capital, it is not what the individual in the street understands as equity capital and it is not what I interpret as equity capital. Year in, year out, between two thirds and three quarters of the capital used by commercial and industrial companies is provided by customers who go into shops. They are savers in a real sense. They forgo consumption, but they do not get issued with a share certificate when they go into a shop. It would be fairly complicated if they were. They do the saving, but they do not get interest on their savings or on their investment.
What we see on the stock exchange, day in, day out, as described by John Maynard Keynes, who understood rather more about economics than some Conservative Members, is a vast amount of speculation which is based on what he described as a combination of psychology and probability theory. That process, carried out by bulls, bears, stags and whatever else, does not seem to be a productive enterprise for British industry.
There are eight basic foreign exchanges in the world. A recent study, which was done not by me but by perfectly respectable City people, shows that $150 billion crosses those exchanges every day. I am told that that is equivalent to about 10 per cent. of the world's trade. Let us suppose that that is wrong, and that it is equivalent to 20 per cent. of the world's trade and that some of the rest is concerned with hedging. We still end up, as the report said, with about $100 billion speculated across the exchanges each day—one third of it in London. Moreover, we still end up with major financial and industrial companies using the foreign exchanges as "profit centres". Industrial companies are not producing goods and services. Rather, they are producing money through the "profit centre" of the foreign exchange market.
That is equivalent to going into a bingo hall and playing 11-digit bingo with $100 billion as the prize every day. Conservative Members say that that is a respectable

activity. I do not believe that 11-digit bingo is a respectable economic activity or that any hon. Member will support such speculation.
It is often said that the Labour party makes no proposals regarding insider dealing. The hon. Member for Horsham made a proposal which did not concern only insider dealing, but it seemed sensible and a means of dealing with insider dealing. He suggested that we should make everybody declare the beneficial ownership of shares and cut out nominee shareholdings. I advanced that idea the last time we debated these matters. It seems eminently sensible. Now that the hon. Member has advanced it, I hope that Ministers will consider it a little more seriously than when I suggested it.
I know that some Conservative Members agree with it, but I do not believe that there should be own-account dealing in merchant banks and broking houses. Some limit themselves and do not have own-account dealing, but I believe that we should legislate to stop it. We would then cut out some of the conflicts that occur.
If asked what I think of the performance of the takeover panel, I think that I would say that it has done a reasonably good job. It has genuinely tried to get things right. I have said that publicly before. I believe, however, that time, technology and the problems that are piling up have ceased to make it acceptable to the public that the takeover panel should be able to carry on as a purely voluntary, body, either outside the scope of the Securities and Investments Board, because it is not appropriate there, or outside some further statutory control.

Viscount Cranborne: I am grateful to the hon. Gentleman for giving way, especially as his momentum has taken him past the point that I wanted to pull him up on. What mechanism would he propose for the conversion from one currency to another, which is essential to world trade, if we were to abolish the foreign exchange market?

Mr. Sedgemore: I know that the hon. Gentleman is not a macroeconomic expert of the highest order, but I was not proposing to abolish the foreign exchange markets. If he wants me to go in to this macroeconomic problem, I shall devote five minutes to it at the end of my speech. It is a big problem for all nation states, whether they are governed by Conservative, Labour or Social Democratic Governments. The hon. Gentleman has put himself on a major point. I do not believe that there is a simple answer, but if he wants me to develop the argument, I shall.
There is some agreement about takeover bids. I even heard the Chancellor of the Exchequer say that some people in the City are taking a short-term view and that they have a kind of tunnel vision. Some of the institutions, such as, I suggest, the Hanson Trust, take a short-term view of takeover bids. The public interest and the Labour party's proposal seems eminently sensible and I am glad that it has some support on the Conservative Benches.
One of the ways in which to get around some of the problems that have arisen, including those with Guinness, is to make it illegal for people to use their own shares in takeover bids and to insist on the use of cash. That would be a simple and fundamental step. I understand that it comprises part of the legislation in some states in America.
Our proposal that, before takeover bids of a certain size can advance, a submission must be made to the


Department of Trade and Industry about their likely economic, commercial and employment consequences seems perfectly reasonable.
Conservative Members cannot disclaim responsibility and say that a group of people or companies are involved who and which are divorced entirely from the Conservative party and its ideology, some of whom have committed a few crimes. Morgan Grenfell is a merchant bank which was advising Guinness, and it gave £20,000 to the Conservative party in 1985. Let us examine the way in which one of the country's most prestigious merchant banks gives money to the Conservative party and the way in which it has handled itself over the Guinness affair. Let us ask ourselves why the Conservative party is accepting funds from such a bank.
First, we discovered that Mr. Geoffrey Collier, the securities chief, was sacked. I shall not comment on that, because I believe that he faces criminal charges. Then we discovered that Mr. Roger Seelig, one of the corporate financiers, was in trouble. At that stage the chairman, Lord Catto, heard the alarm bells sounding. He set up an internal inquiry and we have all seen the headlines that it attracted, such as "No witch hunt, no whitewash." There was a whitewash, however, for nothing happened. Some of my hon. Friends, including my hon. Friends the Members for Cynon Valley (Mrs. Clwyd), who is in her place, and for Bolsover (Mr. Skinner), who is not, tabled a detailed motion about Morgan Grenfell. Lo and behold, it was only four days later that the Governor of the Bank of England, terrified that there was to be another Johnson Matthey bank examination, began to act in response to my hon. Friends' motion.
It was at that stage that we discovered that Mr. Christopher Reeves, the chief executive and a former Bank of England official, had to go. There are two ways of regarding Mr. Reeves's conduct, and I do not want to judge him. Either he was incompetent or he was dishonest, or both. If a former Bank of England official is dishonest, incompetent or both, how can we be assured about the probity of self-regulation in the City? We then learned that Mr. Graham Walsh, the head of corporate finance and a former director general of the takeover panel, had to go. Either he was incompetent, dishonest, or both. How can we believe in self-regulation when a former director general of the takeover panel is dishonest, incompetent, or both? Conservative Members must address themselves to these issues in relation to Morgan Grenfell.
Last night, I was walking across a bridge and talking to one of my—

Mr. Bill Walker: Has the hon. Gentleman read the report of the Adjournment debate which I initiated on 25 July 1985, which dealt specifically with Guinness and Morgan Grenfell? If he has, why was he so silent at the time and thereafter?

Mr. Sedgemore: I must apologise to the hon. Gentlemen because I did not read the report of his Adjournment debate. If it included some gem, I am sorry that I did not read it. That is negligence on my part. I must ask others whether they read the report. The hon. Gentleman wants to be like me, and learn how to use the media rather better. If he had been able effectively to use

the media, reports of his Adjournment debate would have been splashed over the front page of every national newspaper before I spoke.

Mr. Robin Cook: I must correct my hon. Friend. His failure is patently clear. It is that he does not read The Scotsman, and not because he failed to read the report of the Adjournment debate which the hon. Member for Tayside, North (Mr. Walker) initiated.

Mr. Sedgemore: That joke is too subtle for me.
There I was on a bridge talking to a City solicitor late at night. He went south and I went north. As we parted he said to me, "Listen out for the name Hanson." We have a mutual friend called Bomber Hanson, but I do not think that he was talking about him. I think that he must have been talking about Lord Hanson. I do not know whether Lord Hanson is involved in the Guinness affair or whether his name is about to come up. Perhaps Conservative Members can enlighten us. Lord Hanson was knighted in 1983, the same year in which his company provided £82,000 for the Conservative party. Between 1979 and 1984 the Hanson Trust provided £217,000 for the Conservative party. That seems to be a great deal of money. It is something that brings a close connection between the Government, the Conservative party and the use of funds—

Mr. Speaker: Order. The hon. Gentleman cannot criticise a Member of the other place unless by means of a motion.

Mr. Sedgemore: I agree, Mr. Speaker. I am talking about the Hanson Trust. The trust provided the money, and not Lord Hanson, who is chairman of the company.
We have heard about Bain and Co. this evening. It was mentioned by the Government Front Bench spokesperson, but we were not given any details. I believe that some correspondence has passed between the two Front Benches, and it seems that the Prime Minister attended a lunch that was hosted by Sir Jack Lyons at Bain and Co. a few weeks ago. What sort of company is Bain and Co.?

Mr. Robin Cook: The Home Secretary attended the lunch too.

Mr. Sedgemore: We know that one of the employees or associates of Bain and Co. is Mr. Olivier Roux, the disgraced director of Guinness. We know also—this is something that I discovered — that Bain and Co. is about to receive a writ from the Church Commissioners involving a large sum of money for non-payment of rent. We know even more than that, because we had some by-play from my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) in his delightful and brilliant speech about Mr. Gerald Ronson, who returned £5·8 million to Guinness. That was a fee for putting £25 million of the company's money in that firm.
My right hon. and learned Friend did not say that Mr. Gerald Ronson was first approached by Anthony Parnes, a person who was nicknamed the "animal". Mr. Parnes is a director of J. Lyons Chamberlayne. He is a close associate of Sir Jack Lyons, who received a knighthood from the Conservative party and who more recently hosted the lunch at Bain and Co. I dare say that the "animal" was at that lunch. He is a friend of Sir Jack Lyons. We must ask ourselves why the Prime Minister went to the lunch. Who was she trying to meet? Did she want to meet Mr. Olivier Roux? Did she want to meet the


"animal"? Did she want to help Bain and Co. deal with its defence in the face of a writ from the Church Commissioners? Was she trying to give the firm some general solace or, as is more likely, was it a general meeting at which the Conservative party raises funds?
One of the great problems facing the City is that which arises from the big bang, which has not been discussed in the House. I only hope that we shall have the opportunity to do so. I cannot be sure of what I shall say, but there is something disturbing in that separate control of financial institutions may well disappear. Financial institutions have operated basically under some form of separate control—the banks, merchant banks, discount houses, accepting houses and money markets have all operated under it—but they are now beginning to operate under joint control. Most of the clearing banks are in on these mergers. Every conceivable form of financial and economic activity is coming together under the same control. Some firms will not survive and they will go bust. There will be some takeovers of financial institutions as well as some mergers. There is a real fear that in 10, 15 or 20 years time we shall have large mega-merge financial institutions that will wield much greater power than any present institution of that type, and power that may be wielded globally.
American banking law is changing. The regulations that apply to state banking are beginning to change and the New York banks are beginning to come to Britain. With Japanese and American banks coming here, mergers, amalgamation and bankruptcies could occur that will create colossal problems for a Labour Government as well as the present Government. That is something that the House should debate.

Mr. Cecil Parkinson: I have listened with interest to the speech of the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) and his discussion on the big bang and the City revolution. Last week, we heard the speeches of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and today from the hon. Member for Stockton, South (Mr. Wrigglesworth) which seemed to imply that the whole City revolution was started by the Conservative Government as a way of creating a sort of free-and-easy in the City.
I wish to remind the House that the rule book of the stock exchange was referred to the restrictive practices court in February 1979 by the right hon. Member for Sparkbrook. It was the Labour party that decided that the stock exchange. in its old form, was guilty of unacceptable restrictive practices and set out to make sure that the stock exchange rules were changed.
In 1983, the Conservative Government, after four wasted years on the legal case, sought to get the equivalent of an out-of-court settlement and we obtained from the stock exchange all the concessions that were sought by the Office of Fair Trading when it started its action. Indeed, the Director General of Fair Trading, who initially resisted the actions that I took, later admitted that the reforms that had been agreed were the ones he and the Labour Government had had in mind. Therefore, the notion that the free and easy City was started by the Conservative Government and that all troubles such as Guinness flow from it does not stand up to examination. The truth of the matter is that — perhaps the right hon. Member for

Sparkbrook is ashamed of it and perhaps he did not realise what he was doing — that the right hon. Member for Sparkbrook set the changes in train.
It is a mistake to think that the big bang was somehow connected with the Guinness and Distillers affair. That wrong thinking argues that, because of the big bang and the resultant changes, affairs such as that of Guinness have become possible. The Guinness affair was concluded in March but the changes to the City took place on 27 October.
The hon. Member for Stockton, South spoke about the absence of a regulatory system after the big bang but the troubles of which he complained took place before the big bang under the old system. The other fallacy is that because of the big bang and the Guinness affair the new system of regulation has been discredited and there is convincing evidence that what we now need is a statutory system of regulations. It is argued that because of the existence of the Securities and Exchange Commission, insider trading and the Guinness affair came to light.
Mr. Boesky's activities came to the attention of the SEC because someone wrote an anonymous letter to it about Mr. Levene and his insider trading. Mr. Levene then talked about Mr. Boesky and Mr. Boesky talked about Guinness. It was not because of the magical powers of the SEC that Mr. Boesky's activities came to light; it was because of an anonymous letter. I would have thought that the Securities and Investments Board is just as capable as the SEC of receiving an anonymous letter.

Mr. Nelson: Although I accept that the SIB is capable of receiving such a letter, there is nothing that the SIB can do about it.

Mr. Parkinson: I appreciate that, on the Conservative Benches, my hon. Friend is almost a lone devotee of the SEC. The Opposition have argued that there is a need for a body such as the SEC but nothing that has happened justifies that argument. The fact is that Mr. Boesky prospered for four years under the SEC. He made hundreds of millions of dollars and he was discovered only by accident. There is no argument for trying to impose on Britain the system that failed in America.
Opposition Members make a big mistake by arguing that statutory somehow means certain. The impression is that if one has statutory regulations it is bound to work.

Mr. Allan Rogers: rose—

Mr. Parkinson: I shall give way in a moment.
Allow me to offer to the House the experience that I gained when I was Trade Minister. We were having trouble with the Americans who were trying to extend their market regulations into our commodity markets. I invited the chairman of the Commodity Futures Trading Commission—that is another statutory body—to come over and see how we regulated our markets. At the end of the week, he admitted that our system of self-regulation was better than theirs. Unfortunately, he had to leave early because Hunts had cornered the silver market — his statutory system had failed. Therefore, to believe that somehow statutory means certain and that, as a result a statutory system, discovering people is inevitable has no basis when one considers the experience of the American or other markets overseas.

Mr. Rogers: If we accepted the logic of the right hon. Gentleman's argument we would not need statutory


regulations to catch criminals. The process that led to the apprehension of the criminals in this case is exactly the same that pertains in many instances, for example, in America, when one canary sings and the rest of the Mafia are pulled in. American crooks are just the same as British crooks.

Mr. Parkinson: The hon. Gentleman is implying that we will have a system that is voluntary and, in some way, unenforceable. That is the big difference between the two sides of the House.
We do not know whether the SIB will work as it is not fully in place and, therefore, to argue its failure before it is in operation is to overstate one's prejudices.
The SIB is not a voluntary body exercising, if it wishes, powers. It is a body made up of practitioners in the market who understand how the system works but who have imposed upon them, by law, statutory duties that they must carry out. We have a system that is based on the law but run by people who understand the market.
I believe that our system is imaginative and that it will work. It is quite wrong for Opposition Members to argue in favour of the SEC, a system that has patently failed, and to dismiss the SIB which is not yet in operation and which we have every reason to believe will be a success.
The hon. Member for Hackney, South and Shoreditch congratulated one of his hon. Friends because he tripped up the Secretary of State by asking him why investment was not bigger than it was in 1979. Today's debate is on the City and I would argue that it was not a shortage of funds that caused a shortage of investment. That is the implication of the Opposition's motion.
When I first went into the City as a chartered accountant more than 20 years ago there were few sources of capital. One could get short-term money from the joint stock banks, the ICFC that took minority stakes in medium-sized businesses, the merchant banks—but they wanted a substantial stake in the company if they agreed to be involved — and the stock exchange. Therefore, many companies went to the stock exchange far earlier than they should have done. That was the only way to get the necessary money.
Now everything is different. There are venture capital organisations, the joint stock banks have their own merchant banks, business expansion schemes have been introduced and the banks are more ready to lend money. There is, in fact, a proliferation of sources of capital. There is no shortage of money for a good proposition. To criticise the City because the figures show that investment has not increased is to misunderstand the fact that the money is available, but the demand for it has not been there. That is hardly the City's fault, and the demand is growing.
It is wrong to argue that the City has failed in its job of providing capital. There is growing demand for investment capital, and I am pleased about that. However, it is wrong to imply as the Opposition motion does, that the cause of our less than desired investment is shortage of money. It has been shortage of good propositions.
When the Labour Government were in power we had low company profitability and high rates of yield on gilts, and the stock exchange was used by the Government as a way to fund their ever increasing debt. It is outrageous of the Labour party to criticise the stock exchange because

it does not provide enough capital when it was creating an economic climate in which business could not make the profits that justified further investment. We do not want any nonsense from the Labour party about the stock exchange. Nobody used the stock exchange more actively than the Labour Government, to raise money at high yields that were beyond the reach of industry, thus pricing industry out of the investment business.
There is a notion that the British investment institutions take a short-term view. This morning, I was at a meeting of the board of a unit trust group that handles £4 billion of savers' money. We have over 400,000 investors. When Labour Members talk about City institutions and how they are investing money, they talk as if they are the private property of the people who are running the organisations. We are investing the savings of 400,000 people, and it is no part of our business to experiment with them. We have to invest them soundly so that we can give a proper return to those who save with us.
The House partly contributes to the problem of short-term thinking in the City and investing institutions because we have such relatively short parliamentary terms. We have to face the fact that the two sides of the House offer the electorate a different economic system. One of the reasons why our investors shorten their thinking is the uncertainty that could arise if we had a change of Government. Unlike other, successful capitalist countries, we have an Opposition who basically do not believe in private enterprise, so do not support the system.
I refer now to BTR and Pilkington. We have supported enthusiastically the privatisation of nationalised industries, because we believe that the Government are a bad commercial decision taker and should be taken out of commercial decision taking wherever possible. We have also supported the sales because we believe in wider share ownership and giving people a stake in the businesses in which they work and a say in how those businesses are run.
It struck me as absolutely unbelievable, when my right hon. Friend the Secretary of State took the correct decision that the takeover was a matter for the shareholders of Pilkington, and that there should not be a reference, that that decision was criticised by people who have made speech after speech saying that Governments should not take commercial decisions, we should privatise and reduce the size of the public sector. It is wrong of the House to say that we want to take the Government out of commercial decision taking, we want to privatise and spread share ownership, but then to say that there are a range of decisions that are far too important to be left to people such as shareholders, and the Government should intervene and take those decisions.
My right hon. Friend the Secretary of State is to be congratulated on resisting the pressure to refer the BTR bid. That pressure was not the result of a genuine desire to see the Monopolies and Mergers Commission do its job. The only reason why anybody wanted the reference was to delay the bid and to mess it about. It was not to allow the MMC the chance to decide whether the bid was in the public interest.
I have one thing to say to my right hon. Friend the Secretary of State about the review of mergers policy. We have broad criteria which my right hon. Friend uses in arriving at his decisions about whether to accept the advice of the OFT, and the principal criterion is that of national and public interest. My right hon. Friend has been urged


to come forward with a series of very tightly drawn specific proposals. I hope that he will resist that advice, as he resisted the advice on Pilkington.
As an accountant, I found that the section of the tax law that was most effective was the general anti-avoidance provision. The more specific the provisions, the easier it was to get around them. The more specific the rules about takeovers and mergers, the easier it will be for people to work their way round them, and my right hon. Friend will be legislating continuously. With the national interest criteria applied sensibly and wisely, my right hon. Friend has the basis for good decision taking. I hope that he will not allow himself to pushed or cajoled into thinking that if he comes forward with specific and clear-cut rules he will be doing something worthwhile. The present rules, with the national and public interests, as the main criteria, are just what he needs.
I heard the right hon. and learned Member for Monklands, East (Mr. Smith) quoting the theory that one of the problems is that a company that makes investments and does research makes itself vulnerable. The idea is that one can either be profitable or invest and do research. The best companies do both, and they do them in tandem. I know that Labour Members admire the SEC greatly, so I was interested to read a speech by the acting assistant Attorney General of the anti-trust division of the American Government. He said this about the argument that one makes oneself vulnerable if one does research:
Finally, this argument is also contradicted by an SEC study that demonstrates firms that are subsquently takeover targets spend relatively less on research and development than firms in the same industry that are not takeover targets.
The idea that one makes oneself vulnerable in this way is nonsense. Companies that are not doing research are shown, by the Labour party's favourite, much admired organisation, the SEC, to he the vulnerable ones.

Mr. Doug Hoyle: I start by declaring an interest as president of the Association of Scientific, Technical and Managerial Staffss. The right hon. Member for Hertsmere (Mr. Parkinson) talked about voluntary regulation of the City, but that is different from the way in which the Government view trade unions. They insist on the compulsory regulation of trade unions. But when they are dealing with their friends in the City, regulation can be voluntary.
We are debating a scandal without a parallel. Of what has been going on in the City, we know only the tip of the iceberg. There is much more to come out. Whether the Government or Conservative Members like it—I know that they do not, because they are dependent on what they call free enterprise—there are in the City an awful lot of fat cats who are greedy and who are not content with what they are getting with their champagne-breakfast style and with the high salaries that they receive, so move into criminal dealings. At long last the Government have woken up to them and have been forced into action because of the public outcry. It is not something that they were originally determined to do, but something that they have been pushed into doing.
Many interesting people in the City have been dismissed or had to resign. Many of them have been referred to. Those people earn very high salaries. Geoffrey Collier of Morgan Grenfell had to resign because of insider dealing in relation to AE. He received a salary of £300,000

a year. Roger Seelig was very highly paid and he had to resign in connection with the Guinness bid. Ernest Saunders, the chief executive and chairman of Guinness, earned £375,000 a year. Oliver Roux, who was the finance director of Guinness, was seconded from Bain and Co. He was reported to be on a six-figure salary. Christopher Reeves is the chief executive of Morgan Grenfell and was earning £300,000. Graham Walsh was head of corporate finance at Morgan Grenfell and was earning £200,000 a year. Lord Spens was head of corporate finance at the merchant bank Henry Ansbacher and earned £100,000 a year. All those people have had to resign, yet we are told that there is nothing wrong with the City. Those people were earning salaries that are not even dreamt of in my constituency or in most others. In spite of that, they were not satisfied and had to look for ways to inflate their earnings.
Sir Ralph Halpern is the chief executive of Burton. He has not resigned, but his lurid activities were reported in all the tabloids on Sunday. However, I am concerned, not with his sexual dealings, but with his share dealings. This should be of interest to the House.—[Interruption.] The hon. Member for Crawley (Mr. Soames) should listen. He is not renowned for listening. I am concerned about the takeover of Debenhams and the 7 per cent. that switched the balance in the takeover. Sir Ralph's company was involved in that takeover. Mr. Tony Parnes of Alexanders Laing and Cruickshank, known as "the animal", was involved in the Debenhams takeover, just as he was involved in the Guinness hid for Distillers. This gentleman arranged for Gerald Ronson to take an interest. Mr. Ronson was one of the investors involved in the block of 7 per cent. that switched the balance. That Debenhams takeover should also be the subject of an investigation by the Department of Trade and Industry. We might find out some interesting things.
Morgan Grenfell was the banker in the takeover bid by Guinness. The position of that company is somewhat shaky and, having lost so many of its executives, it is in the process of reorganising.
The Government have no policy in relation to merger mania. Up to the end of November, 250 offers were registered for British companies. The value of the bids is £34·4 billion. That is four times the figure of 1985, yet the Government have been complacent about that.
Many famous names have had to fight off takeover bids and some have been successful, such as Allied Lyons, Plessey, and more recently, Pilkington. The chairmen and chief executives of those companies have better things to do than fight off predators or always to be looking over their shoulders at who is going to make a bid. They would prefer to spend all their time, as they should, creating wealth and looking to the future of the company.
We have heard already about the earnings of the City and about how indispensable it is to the nation. We should look at the other side of that. at the capital outflow from the City. Between 1980 and 1985 there was a total outflow from Britain of £30,270 million. That money would have been better used by investing in British companies rather than in strengthening our competitors and putting British companies out of business and employees out of jobs..
Two thirds of the takeovers have been financed by ordinary share capital. That illustrates the critical position of share prices. It also shows why there has been a big rise in the profits of many of the companies which might have been subject to takeovers, while investment in British


industry in general has been stagnant. If investment is stagnant or falling, we know that the net result will be fewer British companies.
The right hon. Member for Hertsmere talked about short-termism. He said that he did not like that and that there was much finance available. Our competitors, such as Japan and Germany, have been investing in long-term ventures but we, especially the City, have been investing instead in short-term ventures because those involved are interested in short-term profits.
The scandal of Guinness has been revealed. There has been resignation after resignation and we do not yet know whether the resignations are at an end. However, we know that about £200 million or £300 million has changed hands in share purchases. We also know that £25 million has been paid in compensation to those who have helped. I do not think that there will be any end to the saga. Every time we pick up the newspapers we see some new issue.

Mr. John Heddle (Mid-Staffordshire): Typical Labour party pessimism.—[Interruption.]

Mr. Hoyle: We do not control the press. It is your press that is revealing the scandals.

Mr. Deputy Speaker (Mr. Ernest Armstrong): The hon. Gentleman should not use the word "your". It is certainly not my press.

Mr. Hoyle: I mean the Conservative party press. I wish that it was your press, Mr. Deputy Speaker, because if it were it might be more favourable to the country and to the press itself.
We know that there have been offshore dealings in the Guinness affair. We are also finding out that spiv after spiv has made a quick buck over Guinness.

Mr. Campbell-Savours: My hon. Friend makes an interesting point. There is a danger that if more and more stories come out, and if incidents surface of illegality and criminal activity in the City, the British public will simply become conditioned to accept them. If that happens, the newsworthiness of those stories will subside and the danger is that we will create a climate of acceptability for these practices in the City. That is a real danger. It will become like Northern Ireland, where, when someone dies, the media do not treat it in the same way as they did perhaps 10 years ago.

Mr. Hoyle: My hon. Friend makes an interesting point which is worthy of consideration. All the time people come up to me and say, "Ah well, Guinness was unlucky. They were the unlucky people, but there were a lot more involved in insider dealing." That is precisely the point that my hon. Friend is making. People also say to me, "Will Argyll press ahead with the litigation, and if not why not?" Is it because, as my hon. Friend says, there is a lot more of this hidden away in the City? We know that that is so when we look at the bid for AE, in which Turner and Newall was finally successful. Hill Samuel gave an indemnity to investors who were trying to fight off the threat to the company. In this case, even the tabby cat City takeover panel voiced an opinion that that was not the right way of conducting the matter. As I mentioned earlier, one individual had to resign because of insider dealing in relation to that bid as well.
Then there is Hanson Trust, which is the epitome of short-termism and short-term profit. We all know that Hanson Trust and Lord Hanson are great favourites of the Government and of the Conservative party. They signify what is wrong with industry in this country. All that we have seen from Hanson Trust is a succession of takeover bids.

Mr. Heddle: Instead of treating the House to this catalogue of episodes that anyone can read in the press from time to time, will the hon. Gentleman devote just a little of his speech to praising some of the exceedingly good things that the City does; for example, the protection that it gives to unit trust investors, as my right hon. Friend the Member for Hertsmere (Mr. Parkinson) mentioned, and the protection that the building societies give to their investors, who now receive a real rate of return at three times the rate of inflation? Will he devote just a little of his speech to an optimistic view of the City, which is the envy of the free world?

Mr. Hoyle: I can understand why the hon. Gentleman and other Conservative Members are nervous when we talk about the City and what is happening there. I also understand why he does not defend the Hanson Trust. What have we had from Hanson Trust? We have had a succession of takeovers that reached their zenith with the Imperial Group takeover last April.
The difficulty now is that Hanson Trust requires even larger takeovers to maintain profits and share prices. It is rumoured that City institutions backed Hanson Trust in its successful bid for the Imperial Group, not because it made industrial sense against a rival bid from United Biscuits Ltd., but because they were afraid of the consequences for Hanson share prices had it not been successful.
Hanson Trust is a company which never hesitates to sacrifice sales, market share or employment for short-term profit. Yet that is the company which is admired by the Conservative party, which is in office at present. Recently, Hanson tried to strip £80 million from the pension funds of Courage into which it had not paid a penny. That is the sort of company with which we are dealing, and those are the asset strippers whom all of us should be condemning. The Conservative party should be interested in building up long-term investments in industry.
The Secretary of State was praised for his conduct over Pilkington by the Prime Minister. Only last week the right hon. Lady said the right hon. Gentleman was right not to refer the matter to the Monopolies and Mergers Commission and that the market took its own decision much more quickly than if the bid had been referred. Of course, it was nothing of the sort. What really happened was that, in the wake of the Guinness affair, and following political pressure, BTR's bid was withdrawn. Pilkington is a world leader in flat glass manufacture—we do not have many world leaders — and it was spending £62 million on research and development and, £200 million on modernisation. It had invested in the regions and was one of the few multinational companies that had its headquarters in one of the regions. The company and its employees were under threat from the predator BTR, although it had made a profit.
It was the outcry that occurred in the House and outside that caused Owen Green to back off. Certainly there was a sigh of relief from the Conservative party when


that happened, because had that not occurred the Conservatives would have been under a lot of pressure from many of their own party who were very concerned that a company such as Pilkington was facing that threat. I have no doubt at all that, before too long, we shall see Owen Green residing in the House of Lords for what he did in withdrawing his bid.
I come to another matter—the destiny of Westland. Its destiny was determined by about six unusual people making bids at the same time. What happened to Westland? Several people purchased shares within the 5 per cent. limit and therefore did not have to declare their shareholding. They were very strange people. There was the Actraint No. 34, Proprietary of Australia which had just purchased 4·99 per cent. There was Lynx Marketing SA, of Panama which purchased 4·79 per cent. There was Rothschilds Bank AG, of Zurich, which purchased 4·89 per cent. There was Sterling Trust SA, of Geneva, which purchased 4·89 per cent. There was Gulf and Occidental Investment Company SA, which purchased 1·38 per cent. Sir John Cuckney said, when he was giving evidence to the Select Committee on Trade and Industry, that he thought there was one other company involved, Les Fils Dreyfus, which also purchased shares. Those purchases altogether totalled about 21 per cent. and they determined which way Westland went. All the bidders appeared late on in relation to the bids that were being made by the Americans and by the European consortium. They all purchased shares and appeared to be voting in one direction. If that was not a concert party, I do not know what was. That is the sort of thing that occurs.
I ask Conservative Members not to be complacent about what is happening in the City or about the destiny of companies that are important to it. What are some of the factors that are encouraging the illegal activity that is occurring? One factor is the massive fluctuation in share prices, which means that enormous profits can be made when a takeover bid takes place. The Distillers shares rose from 200p to 700p in the course of the takeover. There is increasing competition to partake, especially among the merchant banks. We know about Morgan Grenfell. Morgan Grenfell has benefited considerably from the present takeover mania. There is also increased competition resulting from the big bang. If the merchant banks do not keep their present customers, the American banks that are coming in and are determined to press to the limit the regulations will get them instead.
There are large fees and large commissions to be made from the takeover business. There is also pressure on the companies to which I have referred to neglect things that they should be doing, such as investing, so that they can keep profits high and stave off the takeover, merger and asset-stripping sharks in the market. The Guinness bid for Argyll generated £160 million in legal fees and commissions for the City. Thus, takeovers not only make for rich pickings in the City but give the speculators a field day.
What action has been taken? Everybody regards the present takeover panel as a pretty useless body. It has failed to do what it was set up to do in the 1970s—to oversee takeover bids. Many people think that the chairman, Sir Jasper Hollom, despite the fact that he is an ex-deputy governor of the Bank of England—perhaps because he is—has not been strong enough, but the real reason for the panel's ineffectiveness is that it is a purely voluntary body run by the City for the City.

Mr. Tim Smith: This is so sixth rate that it is unbelievable.

Mr. Hoyle: It may be unbelievable. Nevertheless, it is true. The hon. Gentleman might not believe it. Indeed, it seems hard to believe. Nevertheless, that is what is occurring in the City. That is what is occurring all the time.
What action has been taken by the Governor of the Bank of England? Why has he not used his powers? What about the deputy governor? What has he been doing? He has responsibility for takeovers. Why has he not initiated action?
Then we come to the Government. They have been reluctant to take any action. There is a grave difficulty with their Front Bench. The Secretary of State cannot speak on Guinness because it is the family firm arid because the foundations are rocking. The Minister responsible for corporate and consumer affairs, the hon. and learned Member for Folkestone and Hythe (Mr. Howard), cannot speak on Lloyd's. How can people have confidence in the Government doing anything when two of the leading spokesmen cannot voice an opinion on a major crisis in relation to Guinness and Lloyd's? This is a disgusting state of affairs. The country will wonder why they are allowed to remain there when action should be taken.

Several Hon. Members: rose—

Mr. Hoyle: I apologise to my hon. Friends. I have not finished yet.

Mr. Deputy Speaker: Order. Perhaps I can help the House. The debate started at 4.52 pm. The hon. Member for Warrington, North (Mr. Hoyle) is the seventh speaker, and, out of those seven speeches, only two have been less than 20 minutes. Many right hon. and hon. Members are anxious to catch my eye. I appeal for brevity.

Mr. Hoyle: I shall be as quick as I can, but I think you will agree, Mr. Deputy Speaker, that it would be wrong if we in the Opposition did not say what we want.
I am in favour of a statutory body. I should now like to speak a little about the public interest, which the Conservatives have decried. Emphasis should be placed on the public interest. When we talk about the public interest, we should take into account the interests of the employees who created the wealth of the company and who are subjected to a takeover, as well as the interest of the shareholders. Through the trade unions, the employees should be represented on the statutory body. At least one third of the places should go to them. They should have the right to give evidence. That is important, because if the company goes and they lose their jobs, not only they but their families will suffer. They should be able to say to any company that is successful in a takeover bid that the conditions of employment and pension rights should be maintained. If an employee is dismissed as a result of a takeover, that should be deemed to be an unfair dismissal.
It is not enough to consider just shareholders and competition. We should consider the public interest and the national interest. We should consider whether a takeover is good for the country. Equally, we should take into account the interest of the company's employees

Mr. Michael Grylls: I shall not follow too far the line taken by the hon. Member for Warrington, North (Mr. Hoyle), much as I like him


personally. I believe that on almost every issue that he raised, he is entirely wrong. However, in the interests of politeness, I shall not follow him down that route. I shall be brief because I know that many colleagues want to speak.
I shall make only a passing reference to the present problems of the City and the scandals that are coming out almost daily. Everything that my right hon. Friend the Secretary of State said today gave the answer to the criticisms put by the right hon. and learned Member for Monklands, East (Mr. Smith). He made a firm, tough and resolute speech, and everybody on the Conservative Benches was delighted to hear it. I hope that the right hon. and learned Member for Monklands, East will listen to this. It may be to his advantage. He will not damage the Conservative party by trying to smear the City or us. People are too sophisticated to do that, and my right hon. Friend the Secretary of State has given the answer.
The right hon. and learned Gentleman may succeed —it would be a tragedy—in damaging the City itself and all the good things that it is doing for this country, such as raising money for industry and bringing benefit to the balance of payments, and all the things that have been brought out in the debate. Although we may be in an election year, I hope that the Labour party will desist because it is damaging the national interest very much.
I should like to concentrate my few remarks on competition policy, under two heads. One is merger or takeover policy and the other is anti-competitive practices which, again, are an important part of competition policy, but sometimes are not discussed enough. I applaud my right hon. Friend the Secretary of State for the decision that he took some seven months ago in setting up the committee under Hans Liesner from the Department of Trade and Industry to look into competition policy. The House will be comforted to know that the committee is sitting at present, so in a way this debate is timely.
I refer first to merger or takeover policy. I am sorry that my hon. Friend the Member for Horsham (Sir P. Hordern) is not here to hear what I shall say because much of what he said was near to the truth. It is a fine judgment as to whether the law is right. Of course many mergers can be constructive in an industrial sense. When a firm has floppy management, it can be rejuvenated by joining a more dynamic group. It would be idiotic to say anything else. However, we must also weigh this in the scales. For the past 30 or 40 years we have become the most concentrated economy probably in the whole of the western world. I admit that it is difficult to measure — I shall not give statistics, because there is not time — but not many people would contest the truth of that. If the private enterprise system is to work effectively and the market that we talk about and believe in is to be fair, I fear that we have to regulate, and not encourage, or encourage too much, further concentration in British industry and commerce. Many would agree with that.
A concentrated economy also runs absolutely counter to one of the outstandingly successful policies followed by the Government, to encourage the development and growth of small and medium businesses. For 40 years before this Government took office, those businesses had been largely neglected in Britain through a lack of understanding that such businesses are the key to a successful private enterprise economy.

Mr. Hoyle: Will the hon. Gentleman give way?

Mr. Grylls: No, I want to finish my point.
If that is true, if it is important to have a policy to encourage the growth of small and medium enterprises, we cannot allow the economy to become more and more concentrated. One works against the other.
I am sure that the Government want to pursue their successful policies towards small and medium firms and they would be wise to consider some of the effects of merger policy. This concern is not simply a sudden quirk on my part or on the part of others. The provision that I have described has been written into the United States anti-trust law. There is a phrase in American statute relating to the need to protect the interests of small businesses. That is one of the criteria. For many takeovers, that would not be the most important criterion. However, with the Americans' belief in a fair market system and the diversification of economic power rather than the concentration of such power, they believe that that is a factor which must be observed when a merger is under consideration.
With respect to some of my colleagues, it is not enough to say that we will only consider mergers if two similar firms are involved. If BTR and Pilkington had been two glass firms proposing to join together, under the present guidelines established in 1984, my right hon. Friend the Secretary of State would almost automatically have referred that proposed merger to the Monopolies and Mergers Commission for consideration. However, the bid was not referred because the firms were not both glass companies. I do not want to consider the Pilkington case here, because it is finished with and is old hat. However, other factors should be taken into consideration because other forms of concentration may be just as damaging.
The economics editor of The Times wrote an excellent article today. He states:
."Of course, takeovers across industries can result in a reduction in competition if it is possible, for example, for a large company to force rivals out of the market by undercutting through cross-subsidisation from the other industries in which the firm operates.
In a sense, that is a horizontal merger. That can result in anti-competitive practices that would be every bit as damaging to the free enterprise system as the traditional cartel. We should consider adding to our policy — I know that my right hon. Friend is considering this—the protection of smaller firms.
I want to consider anti-competitive practices in general. It is unique to British competition law that our bureaucratic system allows a decision to be made more or less by an official. In other countries, if a firm is damaged by an anti-competitive practice—driven out of business or severely damaged—it can sue and receive damages. What happens in this country? A firm may report to the regulatory authorities the details of that anti-competitive practice and the regulatory authorities—which I admit have a good record in this respect — may decide that that is an anti-competitive practice and must be stopped. Of course, it probably is stopped, but very often it is too late. The damage has already been done.
I believe that there should be some remedy at law for firms that are damaged by anti-competitive practices. It is interesting that in most industrial economies that principle is accepted. It is unique to this country that firms that are damaged by those forms of anti-competitive practice cannot recoup damages.
It would be ridiculous for me to leave the impression—I do not want do to this— that I am against large firms and mergers. In the 1960s and 1970s we believed that it was important to be big, no matter how a firm became big. The lesson that we have learnt by considering more successful overseas competitors is that they have become big because they have been successful, not successful because they have been big. There is a difference.
We should be encouraging the internally generated growth of successful firms rather than growth by acquisition. If that view was taken in respect of merger policy, we would gradually have a less concentrated economy in which a free enterprise system could operate more fairly and successfully. That would be completely in line with the thrust of the Government's policy, which has been so right to aim for a fair enterprise economy. We will achieve that if we adjust our general competition policy in some of the ways that I have suggested tonight.

Mr. Deputy Speaker: I am grateful for the hon. Gentleman's brevity.

Mr. D. N. Campbell-Savours: I am glad to follow the hon. Member for Surrey, North-West (Mr. Grylls). If he studies the Committee proceedings on the Bill which became the Competition Act 1980 he will find that his proposition about anti-competitive practices was debated at some length by myself and my hon. Friends. I would like to take the opportunity to pay tribute to the hon. Gentleman for the work that he performs on some of the more innovative aspects of small business policy that have been fed from the Conservative Back Benches to the Front Bench over the past few years, some of which I have openly supported on the Floor of the Chamber when I believed that they were right and thought that they may work—especially the small business subsidy.
Before I put the boot in, I want to pay a tribute to the right hon. Member for Hertsmere (Mr. Parkinson). In many ways he was the father of the big bang in the sense that he was responsible for negotiating a deal on commissions with the stock exchange in the early 1980s which, in effect, brought in the changes. I was sad to hear him criticise my hon. Friends for being unappreciative of that move. As those of us who sat on the Committee of the Financial Services Bill made clear, we support the changes and the greater freedom and liberation brought about in the City of London.
We are concerned about the vast expansion in the market. We felt that some suitable regulatory system should be in place to ensure that abuses would not break out in the way that they have and will repeatedly break out in future. Without giving the case away, there is one particular reason why an SEC-type statutory operation would have been more appreciated by many hon. Members—the public would have a better perception of such a body.
I do not believe that the British public can understand an arrangement whereby the policing of the City—apart from the statutory powers available under the Companies Acts to the Secretary of State — is carried out by a private firm of policemen in the form of the SIB. The City of London will be policed by a private company. Irrespective of the powers—and we can argue at length whether increased powers would be available to an SEC-type statutory SIB — there will always remain the

problem of perception. We will never convince the people that a private policing operation in the City will work. Even if it did work, people would never believe it. Wherever they saw deficiencies, they would say, even if that was not true—and I will not go into the merits of that — that they arose only because the policing operations were in the hands of a private company.
More brutally, may I deal with the arguments during the past few months about Guinness and what it did. Despite assurances from the Dispatch Box, I believe that the Department of Trade and Industry will try to ensure that the number of people who are prosecuted is minimal. I have no doubt that some of those directly involved in the activities will be prosecuted, but the vast majority of them will not. We shall be fortunate to see two or three prosecutions from this entire affair. I believe that not just two or three people but hundreds of people are involved, and I can prove it. It was not a few people who received the £25 million, if that was the sum paid, but many people. Anyone who is willing to conspire with others to break sections 151 and 152 of the Companies Act 1985 is guilty of a criminal offence under the Criminal Law Act 1977, which sets out the offence of conspiracy. Clearly, some people conspired with those who set up the arrangements that are in default of sections 151 and 152 of the 1985 Act. They knew precisely what they were doing. They knew that they were conspiring to commit a criminal offence, and I believe that they were many.
I warn the Secretary of State that when he comes to the House and announces the names of those who will be prosecuted, I shall be asking for prosecutions under the Criminal Law Act 1977. He knows that they have committed offences and they must not get away with it. It is as important that they are prosecuted as it is to prosecute someone who fiddles his supplementary benefit. They have all broken the law. As the Government have been willing to prosecute thousands of people who have fiddled their supplementary benefits, if it can be proved that at least hundreds, but perhaps thousands, of people are involved in this conspiracy, they should, equally, be prosecuted. I shall expect the Secretary of State to take that action.
Earlier today—I must choose my words carefully because I gave the Secretary of State an undertaking privately — at Question Time I mentioned a licensed security dealer operating in the City and I asked the Minister to confirm that I had given him, privately, the name of that licensed security dealer, who was trading fraudulently, and that, during Question Time, that company was open for business and trading. I know that the people who bought shares today through that licensed security dealer will lose much of their money. Since I asked that question, people will have purchased shares not knowing that they will lose their money, but they will, as many before them have lost.
I gave the Minister the name of the company and mentioned the nature of the offence that was being committed. I put it to him that, since he had the information, unless he took action to close the company immediately — his departmental officials have been considering the matter for several months and, in my view, have been hanging about and not taken the necessary action—it could be said that the Government or the officials had been negligent and that those who had lost money may have a claim against the Government.
I give the Secretary of State notice that I intend to proceed with the case on that basis: I gave him the


information today. I know how much that company has been paying for shares, as today I made arrangements to ring in to discover the sale and purchase prices of their shares so that I can measure any losses in the future. If anyone who has bought shares comes to me in the future, I shall refer him to my statements in the House.
The company, which I shall not be naming—I shall explain why in a moment — has international connections with associated companies carrying out similar activities overseas. A company associated with it in the United States of America is already the subject of an inquiry by the Securities and Exchange Commission. Information that I received from an SEC informant helped me to put together my case to the Minister at Question Time and during this debate, and I have taken that information in conjunction with further information received directly from investors. The company is already the subject of inquiries by the Department of Trade and Industry, and I am at a loss to understand why no action has been taken. There is sufficient evidence to warrant the Minister moving in to close the company before more money is lost.
I have not revealed the name of the company for one reason. The company, which deals in the over-the-counter market, is warehousing shares. It is a market-maker in some shares and, because of its position as a market—maker, if I revealed its name, it would affect the price of shares held by ordinary people. I do not wish to be held responsible for a rapid drop in the price of those shares because many of them could be small savers.
I have been criticised for refusing to name the company in the Chamber, and that is why I gave my reason. It is said that by refusing to name that licensed dealer, I am placing a question mark over other licensed dealers which might, as a result of my actions, lose business. I do not know. It was a hard judgment to make, and I can tell the House that I was up until 4 o'clock this morning discussing how to approach the matter. Eventually, the company will fall, and I place an obligation on the Minister to resolve the matter before the public loses more money.
Finally, I should mention briefly the attempt by Lonrho to take over Harrods. We have all received a mountain of information from Tiny Rowland. The pile of paper that I have received during the past year is extremely thick. There must be a company somewhere doing nothing but photocopying and sending out correspondence. It is significant that much of the correspondence that he is sending out is clearly libellous. I do not know whether he is trying to provoke a legal action. He must realise that he will not get it, so now he simply says what he thinks. Some of the statements are outrageous, but they may be true. The problem is that none of us knows.
I am informed that Tiny Rowland does not intend to give up. He will continue to ply us with information. This man may well be obsessive about this matter, but he may well be telling the truth. He is making grave allegations against Department of Trade officials, people in the Monopolies and Mergers Commission, the Prime Minister and, indeed, the Prime Minister's son, who allegedly was involved in discussions about the takeover. I do not know whether it is true or false.

Mr. Beaumont-Dark: Why mention it?

Mr. Campbell-Savours: That is the problem. We must discover the truth.
Every hon. Member who, weekly or monthly, receives information from Tiny Rowland on this matter needs a full explanation. It is insufficient for Ministers to go to the Dispatch Box, as they do, and answer questions on this matter by referring to statements that were made some years ago about the Monopolies and Mergers Commission's decisions Nos. 1 and 2 on the proposed Lonrho takeover. Today, I mention the tax aspects of the matter. For those who were not present when I mentioned it at Question Time, I repeat that we have lost £20 million of revenue because of a decision taken in the early 1980s to refuse Lonrho the right to take control of Harrods. That in itself is worthy of some form of statement, if only a sentence — [Interruption.] It is not central to a statement, but may be mentioned during the course of a general statement on that takeover.

Mr. Austin Mitchell: Does my hon. Friend agree that a statement, and indeed discussion in the House, will not clear up the matter? Grave allegations which may be accurate have been made. Certainly, in the argument put forward by Tiny Rowland in his letters to hon. Members, a strong case has been made for an inquiry, at the very least.

Mr. Campbell-Savours: From my point of view, it does not matter what it is. All we want is an explanation.

Mr. Kenneth Warren: The title of the debate is:
The City's Duty to Serve the Nation.
As the Opposition chose this topic, I am amazed that more than 95 per cent. of Opposition Members are not present. It is their choice, their debate, and they make enough noise in the headlines—but where are they today? It was a delight to see the hon. Member for Stockton, South (Mr. Wrigglesworth) join us. Where are all his friends in the alliance? Where are the Ulster Unionists? Where are the Scottish nationalists? Where are the Welsh? It is an Opposition day, but they are not here. They serve their case very badly in seeking to criticise the City. They provide Conservative Members with an opportunity to talk in a sane and sensible fashion about the Government's relationship with the City, and to take Opposition time to do so.
The interests of the Government and the City are mutually indivisible in exactly the same way — as we would be told by the Labour party, if its members were here—as the interests of Government and manufacturing industry are indivisible. There should be no qualification about the fact— I am sure that it will be apparent in the Lobbies—that the City does a valuable job for the nation. That job is well recognised around the world, even if it is not recognised on Opposition Benches.
We heard the Secretary of State for Trade and Industry make a sensible statement about the value of the City. Now, in Opposition time, we could consider the way in which Her Majesty's Government should act and react to the City in a fair and reasonable fashion. Our trading position is disadvantaged because of the high cost of money in our domestic and trade economies. I hope that the Government appreciate that the regulation of interest rates should not be imposed so rigorously as to deny competitiveness. We must look sternly at the way in which


the present high interest rates, both in the City and in the promotion of manufacturing industry, are hurting our competitiveness.
The issue of nationalisation compensation has been explored by Conservative Members on a number of occasions. It has been virulently pursued by my hon. Friend the Member for Surrey, North-West (Mr. Grylls), who made an interesting contribution to the debate. The Government must examine their relationship with the City — those who invest in it and those who rely on it to make progress in their businesses. That fact has not been spelt out more clearly than by the representations, for instance, by Sir William Lithgow in the Kincaid case. In letters to hon. Members, he stated that he considered that
The Government's attitude is quite incomprehensible to an industrial community like ours, not least because my organisation could provide so many more jobs in an area of great distress.
He wrote that letter from Port Glasgow in Renfrewshire.
When the Conservative party was in opposition, it was acknowledged that the Government of the day were not fair in the way in which they nationalised industries and paid compensation. I refer to the case of one company. I do not make this a cause celebre, but merely say that it is a sign of the general problem. It was stated before the European Court that Kincaid, an engineering business that had no special departmental aide, was vested in the Government on 1 July 1977. The Government acquired a business valued at £19 million, including £5 million in cash, for less than £4 million. The Government of the day acquired £5 million cash for £3·8 million and a business worth £19 million for nothing. Even at this late stage, Her Majesty's Government should examine this and other instances. The Government must be seen to be fair in their dealings with industry and the City to make sure that they protect future industry and commerce that may be threatened if the Labour party were to be in power. If Conservative Members cannot make the situation fair, the people of this country must look to Parliament and ask, "Where is our protection?"
On 23 September last, my right hon. Friend the Prime Minister, in reply to the chairman of Scott Lithgow, wrote that she could not accept that the Government had
produced unfair results. She went on to say:
Payment of additional compensation would require legislation.
Today or tomorrow is not too late to try to achieve equity. In their relations with those who invest and deal in the City and in the community, the Government must act in a fair and reasonable fashion before we decide that we should always blame the City for any wrongs that may be done, as is so readily the accusation of the Opposition.
What will the Government do about multiple applications in terms of the denationalisations that are most welcome and that we must pursue vigorously? At a convenient time, I shall give the Secretary of State information about the way in which multiple applications are being effected, which, judging from a reply that my right hon. Friend gave me in a written answer last week, appears not to be detected. We do not support anything that will allow multiple applications on denationalisation, but, apparently, they are taking place. I hope that my right hon. Friend the Secretary of State will pay strict attention to the need to control multiple applications without any hesitation.
The tin crisis has almost become a traditional subject of interest to the Select Committee on Trade and Industry,

of which I have the honour to be Chairman. Following a personal representation — I was not acting in my capacity as Chairman—in a letter dated 22 January my right hon. Friend said:
I do not believe that the Government should seek a negotiated settlement of the claim against the International Tin Council and its members.
The Government are held in high esteem throughout the world, and should take the initiative where responsibility is clearly seen to be that of the Government as a participant in an international agreement. We have only 4 per cent. of the total responsibility. I am advised that the Government's total legal liability would be not more than £20 million. However, because there has been no initiative from the Government, the creditors' hankers and brokers have been forced to take recourse in the United Kingdom courts.
If the Government, whom I support wholeheartedly, believe in the strength and the future of capitalism but will not try to ensure that it is protected, I believe that they must examine their position and state whether they are prepared to reconsider carefully the way in which they have acted.
Mr. Justice Millett, when considering the proposals for winding-up petitions, said:
The responsible course now would be for the member states by diplomatic means to negotiate suitable arrangements to meet the shortfall.
The Government have an opportunity to take the initiative, but they are holding back. If they exercised their ability to take the lead in an international problem, it would greatly enhance their stature.
The opportunity for debate provided by the Opposition today has, strangely enough, given Conservative Members an opportunity to tell the Government that they should act more strenuously to protect capitalism and to be seen to enhance its value

Mr. Allan Rogers: I, too, am glad that the House is debating this issue today, although not for the same reasons as the hon. Member for Hastings and Rye (Mr. Warren). For a long time we have been concerned not about the relatively new events with mergers and insider dealing, but with the fraud in the City that has occurred over a considerable period, and that has been well known to the Minister with responsibility for consumer affairs. Indeed, our motion encapsulates the proper dissatisfaction felt not only among Opposition Members but throughout the country with what is happening in the City.
There was a time when the City evoked some national pride; today, it stands for fraud, chicanery and fiddling — [Interruption.] It is true. If we ask anyone on the streets for his views on the City, that will be his general concept—

Mr. Beaumont-Dark: rose—

Mr. Rogers: No, I shall not give way to the Tory Member. Most Tory Members are sponsored by and are consultants to firms and companies operating in the City. Most of them act as parliamentary consultants to large groups that have been involved in mergers and takeovers. I ask them to sit back and learn a lesson, rather than come to the House at this late stage of the debate and become very excited. They should listen—

Mr. Beaumont-Dark: rose—

Mr. Rogers: I shall give way to my colleague and forgive him for his lateness.

Mr. Beaumont-Dark: What lateness? I was here for the beginning and the middle of the debate. Does my honourable colleague think it logical to say that the City is noted for chicanery and fraud? Does he not know that £7·4 billion is earned by the City? Does he think that the world is as stupid as he is? Does he think that the world would deal with us if that were so? Will he not moderate his language and think of the country rather than only of the Welsh valleys, just for once?

Mr. Rogers: I thank the hon. Gentleman for those remarks. Had I realised that he would be so personally insulting, I would not have given way.

Mr. Beaumont-Dark: My honourable colleague was rude to us.

Mr. Rogers: I might have been rude about Conservative Members in general, but I did not personally insult the hon. Gentleman. However, I admit that it is not difficult to be rude to him.
The hon. Gentleman asked me to justify my opening statement; if he sits back and listens, I shall do just that. We are not dealing tonight with the new phenomena of Distillers, Argyll, Pilkingtons and BTR—we are dealing with a long history of fraud and chicanery in the City. The extent of fraud in the City's insurance sector is extraordinary in moral, legal, criminal, financial and social terms—[Interruption.] Perhaps I should say that it is anti-social. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) keeps muttering, and perhaps there are reasons why he does so at this time of night. I simply ask him to listen so that I can put my case.
The position is extraordinary in the number of frauds that are perpetrated, in the audacity of those frauds and in their treachery. In general, those frauds are not simply a matter of one person against another—they are only the vehicles for handling the money of ordinary, decent people who, through pension funds or bank deposits, put their money into the hands of the City — and, more important to me, into the hands of the insurance sector. That aspect of the City has not previously been highlighted in this debate.
Conservative Members are fluttering around their Benches, claiming to be concerned about standards and worried about what I may say. The Government appear to have an obsession with standards—probably because they do not have any themselves. Not long ago, the leader of the Conservative party spoke of standards in society—the need for more law and order, the need for the hanging penalty for terrorists, the birching of hunt saboteurs and the flogging of miners—[Interruption.] If Conservative Members read Hansard, they would then know that that is what was said during the miners' strike. As Max Hastings said,
All the other little human touches that would make British civilisation a better and a finer thing"—

Mr. Warren: I must protest, Mr. Deputy Speaker. The hon. Gentleman has made the serious accusation that a Conservative Member has advocated the flogging of miners. Will he please name that Member?

Mr. Rogers: Yes, I will. I shall not do so now, but will check with Hansard — [Interruption.] Because I have prepared myself for this debate—[Interruption.] I wish that the hon. Member for Edinburgh, Central (Sir A.

Fletcher), who is parliamentary adviser to the Argyll group, would allow me to speak. After all, I am speaking only for the Rhondda constituency—

Mr. Warren: Name the Member.

Mr. Rogers: I shall check with Hansard later.
The one area in which the Government especially lack standards is in their dealings with their friends in the City.
As the Lord Chancellor said last year:
The bottom seems to have dropped out of morality.
When considering the background to the frauds, we must remember that the City has changed. The image the Conservative Members put forward in defence of their friends is one of the City still being of good men and true, working hard and honestly for God, Queen and country; of people whose word is their bond, and who meet in their clubs or at their old boy's reunions and order the world for the benefit of others.
That is the image that Conservative Members would like us to have of the City of London but, of course, it is miles away from the present-day image of the City. It may well have been true some time ago but it bears no resemblance to the modern, high-technology money market where vast sums of money are moved and manipulated, as illustrated earlier by the hon. Member for Horsham (Sir P. Horden), and where the measure of success is not integrity but acquisition and greed.
We know that the City is a dynamic institution and is constantly changing. As Andrew Philips said in The Observer on 15 December, 1985:
With all this, London has become an international crime haven, allowing financial racketers from mainland Europe and the United States to continue their commodity swindles, advance fee frauds and the like unmolested. But we also have a fraud boom all of our own. Any firm you talk to will have its own in-house tale of woe. But it will probably remain under wraps. Exposing crooked employees in court is a rarity.
That is a City solicitor talking. He was certainly not challenged by his friends in the City.
In the research that I have done for this debate, I have been impressed by the scale and number of frauds perpetrated. When I asked the staff in the Library if they could give me a list of all frauds that had been brought to public attention in the past couple of years, they came back to me a day or so later and said that they could do it but that there was so much I should get someone to help me carry the paper. I was not impressed, I was frightened by the volume and number of frauds perpetrated. In 1981, for example, the City of London police fraud department had 80 cases under investigation. In 1984 there were 117. New matters recorded were 536 in 1981 and 621 in 1984. In 1981 there were 35 arrests. By 1984 the figure had increased to 77.
Before Conservative Members applaud the Government for the increase in the number of arrests, I would like them to consider the fact that there were only 18 Crown court cases in 1981 and only 18 in 1984; there has been no increase in the number of City fraudsters brought before the courts. The sums involved are huge, almost beyond what normal people can comprehend. A recent study, for example, calculated that British companies are now defrauded of £3 billion or more a year.

Mr. Beaumont-Dark: Load of cobblers.

Mr. Rogers: The hon. Member is using a rude word. It is probably either because he cannot understand, hear or read—

Mr. Beaumont-Dark: You are talking nonsense.

Mr. Rogers: —and he will drown there in his ignorance not just for the rest of the evening but probably for the rest of his life.
An informed insider reckons that the recent reinsurance frauds netted £500 million. The City of London fraud squad has actually reported these figures.

Mr. Beaumont-Dark: That is too much.

Mr. Rogers: Are the City of London police figures wrong? I would prefer to accept them rather than the mutterings of the hon. Gentleman. The Government's own Inland Revenue has come up with figures as well. If there is nothing going on, as the hon. Gentleman is saying, why on earth in 1985 did Lloyd's agree to pay the Inland Revenue £42·5 million in respect of liabilities wrongfully secreted by members of Lloyd's? These were men of high probity, men in the City who settled with the Inland Revenue for forty two and a half million quid. That is the scale of the fraud that goes on in the City.
Andrew Philips has further referred to underresourcing. Perhaps I could refer to the number of people involved in investigations in the City, the numbers that I have mentioned as compared with the numbers that my hon. Friend the Member for Workington (Mr. Campbell-Savours) mentioned, when he talked of hundreds, if not thousands. We are dealing with cases that are only in the low hundreds, because there are no people to investigate the crimes. The allegations are being made, yet there are insufficient trained police to catch up with the criminals. I quote Andrew Philips again, when he talks of
the bizarre under-resourcing of those responsible for policing the City and bringing its malefactors to book. The Fraud Investigation Group of the DPP, for example, has a paltry qualified staff of 21.
Over 30 specialist claims control units investigate petty fraud in the social security system. My hon. Friend the Member for Workington said that it would be quite proper for people who were cheating on supplementary benefit to be brought before the courts. Quite right, but why do the Government have to have thousands of inspectors chasing people who may have cheated them of 5p or lop and only 21 people investigating the City of London?
The Minister intimated last year that he was going to put more resources into this area. Perhaps he could give us some indication of this now. I am sure that he will accept my argument that more resources should be put into increasing not only the number but also the quality of the people who do this work.
It has been argued by Government Members that other financial centres are more corrupt than the City of London, that there have always been rotten apples in the City and that we have to live with corruption and fraud. I do not think that we have to. This debate today is vital for the interests of the country. We Opposition Members are to be applauded for removing the wraps from the iniquitous goings-on in the City of London. The debate should not be in any way about self-regulation versus statutory control because to some extent it is now sterile. We cannot legislate for an institution whose moral foundations are crumbling. We can have the finest laws on earth, the finest structure and the finest institution, but if there are crooks operating inside and we do not root them out it will still be an evil, decaying institution.

Sir Alex Fletcher: I am obviously happy to declare my interest in this matter, first as an adviser to the Argyll Group but, more important for the purposes of this debate, as the Member for Edinburgh, Central, the United Kingdom's other financial centre. I might add that also in my constituency I have what was supposed to be the headquarters of Distillers, although the actual headquarters' activities were rather difficult to find.
I shall be very brief on matters of competition policy and in terms of City regulation, not least because my right hon. Friend the Member for Hertsmere (Mr. Parkinson) covered these points extremely well in his speech. I had the pleasure of working with him at the Department in 1983. There should not be over-reaction to the criticisms that have been made by some of my hon. Friends, but more frequently by Opposition Members, about policy on competition and mergers. I recollect that in 1973 there was over-reaction to the secondary banking crisis. As a result we had the development land tax, which stifled economic growth in the market.
On the question of the regulation of the City, the biggest problem that we face on this side of the House, for which I must take much of the responsibility, is the continued use of the expression "self-regulation". Self-regulation was the old system of voluntary club rules in the City, but the new system which has been introduced in the Financial Services Act 1986 is by no means voluntary. If people wish to trade and do business in financial services in the United Kingdom, they are obliged to register and to submit to the rules that will be supervised by the Securities and Investments Board. These rules are no soft option. They require the consent of my right hon. Friend the Secretary of State for Trade and Industry. He in turn has the full advice of the Director General of Fair Trading. So I can only apologise for having in my time at the Department stuck with the term self-regulation. If nothing else, I can now see how badly it describes the system that is being introduced.
In the interest of time I shall come straight to the problems that confront us in the Guinness case. This is a case of financial fraud clumsily perpetrated, one that was bound to be revealed, if not by Boesky or Ansbacher, by someone else; most likely it would have been the company auditors, Price Waterhouse. I have every reason to believe that when the DTI inspectors arrived on the scene Price Waterhouse was well on the way to investigating many of the matters that are now being aired publicly. Instead of Price Waterhouse presenting the evidence to the company's shareholders, as it would have done, it presented it conveniently to the DTI inspectors. I have no doubt that Price Waterhouse would have carried out its public duty whether or not inspectors were sent in.
I wish that more of our companies would return to the habit of taking advice from their auditors, rather than always going to the smoothly operating merchant banks in the City. There is a good tradition in this country of people going to their accountants. This is not a commercial for my profession but it is a fact that companies do well to seek financial and business advice in general from their auditors.
The point that I wish to make in bringing in Price Waterhouse at this stage of the debate is that investment


protection is not a new invention. We may be critical of aspects of it, but it is carried out day in and day out by firms such as Price Waterhouse.

Mr. Wrigglesworth: The hon. Gentleman has raised a very important point about auditors, but is the history of auditors in not blowing the whistle on matters of this sort good enough to give him the confidence that he has about the role of Price Waterhouse in this case? Does he not feel that the powers of auditors should be strengthened?

Sir Alex Fletcher: In my experience, yes. Having worked as a professional accountant, and having been involved in audits, I have seen many examples of fraud being exposed. It is not always exposed publicly, because it does not always have to be exposed publicly. If the auditor confronts the company chairman and says, "This is not right," nine times out of ten the company chairman will see that the matter is sorted out or that the police are called in and an investigation takes place. I am talking not about a cover-up, but about the power of an auditor to declare publicly in his audit certificate that he is unhappy with the way that the directors are treating shareholders. He has such power that the directors cannot afford to go against his advice.

Mr. Robin Cook: The hon. Gentleman is making a serious point and I am with him in much of what he says. He will appreciate, of course, that his last observation weakens some of the force of his argument that Price Waterhouse would have been going to the chairman of Guinness, Ernest Saunders. If that method of investment protection is to work, would it not be desirable to consider having an audit committee within the board?

Sir Alex Fletcher: I do not disagree with the last point that the hon. Gentleman has made, but it is wrong for him or the House to think that because an auditor finds a difficult chairman that is the end of his action in the event of fraud. He has other powers available to him, and he uses them. A firm of Price Waterhouses's stature need fear no one in anything that it might come across in an audit.
On that point, I might say to the House that Price Waterhouse may also find evidence in the course of its investigation of Guinness of cash payments for which there will be no invoices, payments that were probably made in plain brown envelopes to members of the professional criminal classes. I say this because I have reason to believe that someone in Guinness may have resorted to tactics designed to intimidate those who, like myself, desired an investigation into the affairs of the company following its acquisition of Distillers. I know that such payments are difficult to detect. As I have said, I have worked as a professional accountant and I know the difficulties that Price Waterhouse faces. I am sure that if it detects such payments it will present its evidence to the new directors of Guinness, and I am sure that they in turn will wish to be as forthright about these as about the other matters that have been made public.

Mr. Barry Porter: rose—

Sir Alex Fletcher: I am sorry, but I cannot give way. I must allow hon. Members who have been here all afternoon an opportunity to speak.
During the Report stage of what is now the Financial Services Act I referred briefly to the takeover panel, which

is the last remaining vestige of the old club rule system of self-regulation. The Guinness affair has confirmed my view that the panel should become part of the new statutorily backed system, whether as part of the SIB or in some other way. It would be better if it could be contained within an existing body, rather than create another body which has to supervise the affairs of the City. This is a matter to which my hon. Friend the Minister can give further thought.
During the Argyll bid for Distillers, Argyll complained to the takeover panel a number of times about certain dealings in Guinness shares. The panel simply accepted the assurance of Morgan Grenfell over the telephone that the takeover rules were not being broken. With the benefit of hindsight, we need much more effective supervision in the new markets. The SIB will have the resources and the authority that the panel lacks to investigate and take quick action where evidence suggests that all is not well. In any case, the SIB will be doing just that in the markets generally. I hope that in reply to the debate my hon. Friend will go a little further than my right hon. Friend in saying how he thinks the panel might be brought into the takeover sphere.
In the wake of the Guinness revelations, the Chancellor of the Exchequer and the Governor of the Bank of England have acted quickly and effectively in the City. They were absolutely correct to ensure that the top brass cannot simply dismiss junior directors and leave it at that. The captain is responsible for the fate of his ship, whether he is on the bridge or down below in his bunk. That should apply on land just as much as it does at sea.
Serious as these City matters are, the fundamental question in this shameful affair must be the legality of the Guinness acquisition of Distillers. I can do no better in that respect than quote briefly from the Financial Times of last Saturday 24 January:
It is now clear that the takeover battle for Distillers was not decided simply by free market forces. Instead the share price of Guinness was manipulated so as to give shareholders in Distillers a misleading impression of the value of its bid.
That says it all.
The criminal matters arising from this affair will be dealt with by the courts. Argyll and the other companies will decide what civil actions they should raise against Guinness and its advisers. But what about the Scotch whisky industry and its future? A year ago Guinness followed Argyll's lead and promised to return to Scotland the headquarters and top management of Distillers as part of the newly merged company. That commitment was broken, along with several others.
Are the shareholders of Guinness content that the Guinness family directors and the remaining executive directors, who sat silently but profitably throughout the Saunders' stewardship, should be permitted to merge or dispose of Johnny Walker, Dewar's, Bell's or Gordon's as they think fit? I have every respect for the new non-executive directors and the new chairman, Sir Norman Macfarlane, who is a personal friend of mine, but their hands are full trying to measure the extent of the damage inflicted on the company by its directors. In any case, their presence now does not alter the thrust of my question about the future of the Scotch whisky industry.
In recent weeks the City has revealed its deep concern for its reputation as a leading financial centre, and rightly so. I have already praised the work of my right hon. Friend the Chancellor and the Governor. But the City has another


equally important role in this affair as the major institutional shareholder in Guinness. The City backed Guinness twice last year, first in the bid—many people in the City took the view that because it was an agreed bid with Distillers they should back both the Distillers board and the Guinness board — and again at the extraordinary general meeting at the beginning of September when it personally backed the chairman when he went against all that the City should believe in and said that he would be chairman and chief executive. He was stubborn on that point and the City gave way, and we know why. He could not risk an independent chairman — if hon. Members will pardon the pun — of Guinness. If Sir Thomas Risk had become chairman, the company's affairs would all have tumbled out in the few weeks thereafter. However, that was not to be. On both occasions the City was seriously misled. Indeed, it was deceived.
I respectfully suggest to the City that in the present circumstances, with Guinness confronted by enormous management and financial problems and possibly vulnerable to an overseas bidder, and with the competition policy that has been stated and restated many times—the Government cannot simply kick it into touch to the Monopolies and Mergers Commission; at least, I hope that they would, for reasons not to do with competition or the public interest — it should, as the dominant shareholder, assert its influence on the future of the Scotch whisky industry, and he seen to do so.
The City would enhance its reputation a great deal if it showed that it could act, not just as practitioner, merchant banker, broker and dealer, but responsibly as a shareholder, rather than have this great industry floating around rudderless and, at the moment, captainless. No new captain coming on board suddenly out of the blue would easily remedy the enormous problems that that company faces. That is where I see the City's further responsibility in this affair.
Ministers also have a responsibility here, because they have it in their power to influence swift and effective action to heal the severe wounds which the Guinness company has inflicted on the Scotch whisky industry. This is a time where the aims of the City, of the industry and of the Government should combine. They should be at one in ensuring that our financial reputation, industrial performance and good government prevail.

Mr. Austin Mitchell: I followed the speech of the hon. Member for Edinburgh, Central (Sir A. Fletcher) with great interest. I agree with the major part of his argument. Indeed, quite by coincidence, I have just written to the Prime Minister and the Secretary of State for Trade and Industry suggesting that Guinness should be required to divest itself of the Distillers company. We cannot countenance a situation in which the criminal is allowed to keep the spoils of the crime. The hon. Gentleman mentioned the brands concerned. Will it be good for the reputation of those brands that they are now diluted with Guinness in the market? It will certainly not be good for Scotch whisky. I hope that that suggestion will be considered seriously because such a measure is well justified in this case.
The hon. Gentleman's speech also stood out, if he does not mind me saying so, because, unlike many other speeches by Conservative Members, it was not a panegyric for the City. Clearly, Conservative Members are sensitive

about the City's reputation, as well they might be, but to defend it on the grounds that it earns so much money overseas for Britain, or at least for a section of Britain, is rather like the citizens of Colombia defending the drug trade for fear of endangering overseas earnings.
What happened in the Guinness affair was surely a test of the City club and the vaunted principle of self-regulation. Most social security frauds, which the Government are so assiduous in dealing with, come to light because neighbours report on the fiddler. They complain to the Department of Health and Social Services. Yet here, in full view of the City, was a scandal of major proportions which many people knew was going on. That kind of thing cannot be kept within a close circle. The merchant banks, the institutions and the overseas connections involved must have known on a considerable scale what was going on, but nobody grassed. Nobody turned anybody in and nobody complained. They all sat there silent—the club operating.
Then the City asks us to accept the principle of self-regulation; that the mafia can best do its own police job. We see that kind of performance in that kind of case, faced with that kind of scandal. That surely undermines the whole principle of self-regulation. The stimulus to the inquiries, the original accusations and information, came from the United States, not from the City of London where it had all been happening. That is a major indictment of the City.
I do not want to join in this chorus of denunciation. Clearly, there are major problems. Insider trading is a major problem. If the Government want to encourage shareholder democracy, they must not allow the small shareholder whom they are encouraging to be ripped off. Yet that is what is happening with insider trading. The smaller shareholders are being ripped off by people with inside information using it for their own, now criminal, fortunately, purposes. That is what is at issue. Although few cases have been detected or prosecuted, it clearly must be occurring on a considerable scale judging by the share price movements of companies in contested takeovers. The movements always start before the bid is launched. Most of the research that I have seen shows substantial movements, which can only come from insider information and trading before the launching of the bid.
The scandal is amplified by what went on in addition in Guinness. But I do not find that surprising. The City is, after all, about money. It is about self-interest, greed and speculation. It is about lemmingism turned into a computer programme and wearing a dark suit. The City is not the Church of England at lunch. It is not a cathedral and we should not be surprised that such things happen.
The City is now characterised by a kind of up-market barrow boy mentality. It is rather like the Conservative party. There is no noblesse and there is no oblige. There is a kind of lowering of the accent. The elocution teacher element has gone. It is about that kind of greed and self-interest. Those who do not make it in the City, in either sense of the word, come here to the House of Commons as the pioneer corps of the City, trying as best they can to defend what is going on down the river from which they are mercifully excluded. That is not surprising because, in the ethics of the jungle, people will get away with what they can. It is no use expressing surprise that that has happened.
We need proper, effective regulation and that is why, in Committee on the Financial Services Bill, Opposition


Members were adamant that the Government should place regulation on a statutory basis. We said that there should be a body with the power to prosecute and to be its own police force, rather like the Securities and Exchange Commission in the United States, and functioning in the same fashion. In the more intimate atmosphere of the City, my hon. Friends and I saw that as the most effective way of dealing with the issue of regulation.
Indeed, we advised the Minister that a Labour Government would have to begin the work of regulation all over again if he did not accept our suggestions. We had hoped that we could come to cross-party agreement on some statutory body. The Minister unwisely rejected that advice and the Government are now desparately trying to back-pedal from their current position. They now have to strengthen what is, essentially, a limited company, financed by the City to regulate the City. That is not good enough.
One of the next Labour Government's first jobs on taking office will be to restore the City's reputation. In that sense, we have its real interests at heart. Its trading ability and worldwide connections depend upon its reputation and it has done more harm to its reputation than have any attacks from this side of the House. By providing a statutory basis for regulation, we shall be defending the City's reputation.
We should go further. I would like to see a requirement for the registration of the beneficial ownership of shares so that overseas nominee companies cannot go in for such raids as are involved in the process of takeover. Why should the beneficial ownership of shares not be registered? That is a legitimate requirement, and one of the problems facing us is why are the Government not proposing that.
My hon. Friends and I should also like to see a takeover panel with statutory powers and with a duty to take the economic situation of the company and the wishes of the workforce into account to stop the highly leveraged bids that have been built on a pile of money and credit, so that we can adequately control takeovers. I would give the first response to any bid to the employees of the company so that they can take over their own company, if that could be written into the legislation. A takeover panel with statutory powers seems to be the absolute minimum requirement.
If the Prime Minister is so keen on turning the unions over to their members, why is she not so keen on turning companies over to their shareholders? Why are the Government not bringing forward a radical programme of shareholder democracy, if they want to encourage small shareholders? Shareholders should be given more say in power and control over their companies. Why are the Government allowing small shareholders to be fleeced, exploited, rooked and duped in the way that has happened because of insider trading? Why are the Government not making the same song and dance about shareholder democracy that they made about the trade unions? Why are the Government not doing any of that?
I should like to deal briefly wth two problems. I decline to join the chorus of praise about the achievements of the City. In the main, those achievements have benefited a fairly small and wealthy class in this country, and not the great mass of our people who depend on the real economy

of jobs, manufacturing and industry, not on manipulation, and certainly not on a City that is now an adjunct or an outhouse shed to international manipulation, instead of having British interests, industry and investments at the centre of its preoccupations. The interests of the people of this country are in industry and not in the speculation of the City. Therefore, I decline to join the chorus of praise.
I note that our share of world financial services has been declining as steadily and at about the same rate as our share of world manufacturing trade. If that is achievement, the City will shortly be in the same situation as British manufacturing industry. In part, British manufacturing industry is in its current situation because of the City's approach to it.
The Chancellor has told us that he condemns shorttermism in the City. He is the kind of man who should recognise short-termism, whenever it occurs, because his economic policies are essentially based on a short-term approach. However, in this instance, the Chancellor is right to point to the problem of short-termism in the City and to draw attention to the problems that that causes. The City's short-term attitude towards investments, shared by the banks, has fostered an attitude of shorttermism towards takeover bids, or the possibility of such bids, and is a penalty on investment. Any company that takes a long-term view makes itself unattractive to the market and immediately vulnerable. A company with an investment programme that is designed to enable it to survive as a competing, effective company in a competing world market makes its share price less attractive and, therefore, becomes vulnerable to takeover. A short-term attitude penalises innovation and one of the great problems facing this country is the lack of finance that the City has provided for innovation, new initiatives and new products.
We do not have a similar ability to the Japanese to think long-term. The Japanese Ministry of International Trade and Industry not only has influence, but common personnel with the banks, and is able to arrange finance for a company that wants to invest in the long-term and to get a certain share of the market for its new products. That allows the company to sit through the hard years of getting a market share and building up its product and marketing force and to survive to draw the benefits. In Japan, a company can decide the market share that it wants, can get the finance to achieve that and can build on a long-term basis. That is something that we have never been able to do in this country. The City and the banks are largely responsible for the fact that we have not had such a long-term approach to investment. It is now too late for the City to pull its socks up. The City is doing a bit but it is certainly not doing enough. When it comes to investing in industry, the banks have nothing like the record, reputation or ability of the banks in West Germany. The approach of the banks has been short term. They want a quick, profitable balance sheet. A profitability time scale of three months seems to be the aim, rather than thinking of the five or 10-year expectations of the company.
The banks in my constituency are much more keen to operate as glorified pawnbrokers and to provide money for assets rather than to invest in the future for investment, growth or business. If those banks lend money they are too keen to charge fees for arranging the loan that would be a burden on the firm. The banks snatch the loan back at the first sign of difficulty and cannot evaluate whether the


firm has a real possibility of success. They do not nurture business as their television commercials tell us they do, and they certainly do not nurture business as do the West German banks.
We need an institution that looks to long-term investment. That is why the Labour party proposes a national investment bank or an industrial bank—I am not sure what the current nomenclature is—which will bring back, by stick and carrot, money that has been invested overseas and ensure that it is invested in Britain for long-term purposes.
The weakness of the banks and the City, and their failure to nurture industry and he involved with it like the Japanese and West German banks, is one of the reasons why we have had to labour too long with an overvalued pound. The interests of finance are taken separately from those of industry. The West German and Japanese banks are keen to see that their exchange rates are as competitive as possible. They are keen to resist appreciation. They must allow their exchange rates to appreciate substantially if we are to trade fairly, win back markets and indeed survive in the face of competition from them.
West Germany and Japan are now trading unfairly because the value of both currencies is kept lower than it should be by such devices as exporting capital, low interest rates and membership of the European monetary system. We should have gone in for that type of strategy if our banks had had similar involvement with industry and knowledge of its interests.
We are all worried about the amount of credit. The Bank of England has called it the overhanging glacier of credit. It is one of the main engines of inflation. An example of that is the appreciation of house prices. That appreciation creates collateral. People can then borrow on an appreciating house price and, because more credit is available, the house price increases again, enabling people to borrow even more.
One of the Labour party's aims should be to achieve effective control of credit. We should reverse the decisions that have been taken in regard to competition and credit control. They were disastrous, as they made credit an engine of asset appreciation and speculation. We must be able to direct credit so that it is used for the proper purposes of industry and the community.
I should like the banks to be required to take Treasury bills at a low rate of interest so that they cannot fund the debt in the traditional fashion, and so that we can use Government credit and put the money out directly into public spending, benefit increases and, if necessary, tax cuts to stimulate the economy rather than pump it out through the banks. The latter course leads only to a fever of speculation on asset appreciation. It is not for the banks to fuel the fever of speculation and takeovers. One of our first jobs, as the Government, must be to ensure that credit is used for the people and not for the banks.

9 pm

Mr. Peter Lilley: I too must declare an interest, although I am currently on leave of absence from my old firm. Like each right hon. and hon. Member, and every constituent who has a pension plan or an insurance policy, I have a vested interest in effective and rigorous regulation and honourable and honest investment by those people who handle our funds in the City.
It is therefore sad that riot one Liberal Member of Parliament has turned up for such an important debate and that, although it is an Opposition day, fewer than eight Labour Members are present.

Mr. Robin Cook: There are only nine Conservative Members.

Mr. Lilley: I should like to deal with some of the sources of confusion which bedevil the debate in the House and in the country.
The first is the term "self-regulation". Unfortunately, it normally conjures up the idea that it is all voluntary or, at best, imposed by the moral persuasion of professionals in the City. People therefore deduce that we need something statutory. What we have is a system of practitioner-based statutory regulation. The alternative is civil servant-based statutory regulation. Anybody who believes that it is possible for civil servants to regulate a business that is so complex and rapidly changing as effectively as those who operate a system which involves practitioners who know what is going on is talking through his hat.
The motion talks of imposing a statutory independent commission—an SIC. The Opposition seem to believe—the right hon. and learned Member for Monklands, East (Mr. Smith) implied it—that we have not established any body to supervise the City, have no plans and are relying on the sense of obligation of those involved. All I can say is, to use the words of the advertisement, he should go and tell SIB.
The second source of confusion is what might be called a paradox of successful detection. As long as crime and misdemeanours go unnoticed, nobody thinks that there is a problem, but as soon as we have some success at identifying crimes and those responsible for them, the public becomes aware of the problem and, as the public is wont to do, says that something must be done. It says that precisely because something has been and is being done.
I hope that we can get over the fact that we are successfully identifying wrongdoing which was previously going unrecognised, not least because some of the things which are now crimes were riot crimes under the Labour Government.
The third source of confusion arises from the two uses of the term "moral standards" in the phrase, "declining moral standards in the City". The first use concerns the standards which we all agree ought to be observed and which are enshrined in the rules and laws that govern the City.
The second use is the degree to which those standards are at any time adhered to and complied with. There is no doubt in my mind that the standards that are accepted and enshrined in the rules and imposed by law have increased steadily and, over a period, dramatically from those which used to prevail. I can think of many examples, and the most obvious is insider trading, which used not to be an offence in law and was not considered to be morally wrong. Through lack of rigorous analysis, it was not known who lost as a result of it.
My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) talked in an earlier debate about his experience in the City. He explained that at that time
there was no legislation on insider dealing bcause nobody imagined for a moment that there would be an orgy of insider dealing."—[Official Report, 20 January 1987; Vol. 108, c. 793.]


He suggested that the City did not reckon to involve itself in that sort of activity. I must tell my right hon. Friend—I endeavoured to do so at the time—that he let a lot pass him by. It was considered the norm to deal on the basis of insider information, if it was available, until about a decade ago.
Other changes have raised the standard of morality and rule-making in the City, including the change of attitude to multiple applications for new issues. That was considered to be a bit of a lark and it is now potentially a criminal offence. It used to be considered normal for those working in banks and broking houses and acting in a corporate capacity for a company to deal in the shares of the company. That would now normally be prohibited except on the terms on which the directors of companies deal. It used to be considered normal to deal before offering advice to a client. It was commonly held to be rather a recommendation when it was said, "I have bought some myself, old boy; why don't you?" That is considered now to be wrong and improper and no one is expected to deal on that basis until after all his clients have been enabled to buy.
There have been changes in the morality and rules that we seek to establish in the City. None of us has any firm evidence whether there has been any change in the number of bad apples in the crop and we do not know the extent to which there is compliance with the rules. My suspicion is that there has been little change over the decades and that there are as many rotten apples now as there were in the past, but probably no more.
There is the belief that, if a company invests, its profits will be reduced and it will render itself vulnerable to a takeover. This is held to be the mechanism by which the City enforces a short-term attitude on industry, which leads to a lack of investment in research and development, for example.
Short-termism is a weakness in industry, in the City and not least in politics. It was Lord Wilson of Rievaulx who said that a week is a long time in politics, but it is nonsense to suggest that investment is discouraged by the City and that it leads to takeovers. Investment does not reduce a company's profits. It does not enter into the profit and loss account until after the project in which it has occurred comes on stream and starts producing profits. The only areas in which there is a significant reduction in short-term profits are those where research and development is written off in the short term, and that is especially important in the pharmaceutical industry. Exploration costs are written off straight away in the oil industry, which again is an important factor.
It so happens that the pharmaceutical and oil industries are favoured by the City and are not prone to successful takeover bids. They have not been dissuaded from investing. On the contrary, they have invested heavily, successfully and in the extremely long term. I used to be involved in the oil business and we took a 20-year view. I believe that much the same is true of the pharmaceutical industry. The City has encouraged that, not discouraged it.
The Opposition are trying by means of the debate to arouse misunderstanding in the City on the basis of their own semantic confusions. I have mentioned the

pharmaceutical industry and I think that the Opposition should take the motto that was hung above a pharmacist's shop, which was, "We dispense with accuracy".

Mr. Bill Walker: I am grateful for this opportunity to contribute to this important debate. First of all, I declare that I have no interest whatsoever other than that of a Member of Parliament in whose constituency are the firms of Distillers and Bell. On that basis, I shall concentrate my comments, in the few minutes available, on the problems in the city concerning Guinness.
In my Adjournment debate on 25 July 1985 I spelt out the problems concerning the decision taken at that time by the takeover panel. I said that I considered that the takeover panel had made the wrong decision concerning the Bell takeover when it allowed Morgan Grenfell to continue as Guinness's merchant banker and adviser while Morgan Grenfell's corporate finance department had acted, for 10 years, as Bell's corporate finance department. Therefore, it was privy to all Bell's secrets right up to the point of the takeover. Immediately prior to the takeover, the corporate finance department was acting on behalf of both Bell and Guinness. There were no Chinese walls there.
I criticised the takeover panel because I believed that it had let the City down and I still believe that—but, more important, the criticism that has been heaped on to the City should properly and justifiably be put on those whose job it was to look after the affairs and morals of the City. I believe that the chairman of the takeover panel should consider his position.
At the time, I said that it was wrong of the takeover panel to allow Guinness, during the Bell takeover, to say:
Scotland's best performing manufacturing company has lost its way.
That was the biggest lie that I have ever read in my life. No one could ever describe Bell as a company that had lost its way. Every year, the company had increased its profits and its sales, and the employees — who were all shareholders—enjoyed its profitability. I shall return to the matter of employee shareholders shortly as I think that it is important and crucial to any decisions that we make about the future of the City.
I found it rather odd that General Accident, Bell's next-door neighbour, deserted Bell at the last minute of the takeover—it held 11 per cent. of Bell's shares—and if it had stayed with Bell, Bell would probably be independent today.
The reason I speak about this is that there have been reports in the press, which I confirm are accurate, of correspondence between a director of Noble Gorssart, which was acting for Guinness, and the present chairman of Guinness, Sir Norman Macfarlane. I believe that there are questions that require an answer. I am not seeking to cast any slurs, but those questions must be answered. Why was Peter Tyrie's account of £51,000 at Quayle Munro paid for by Guinness prior to the completion of the takeover? No declaration was made.
I congratulate my right hon. Friend and hon. Friends on the Front Bench on the speed with which they have moved. They have my full support. The criticisms that I am making are in no way a reflection on the present Front Bench. However, I must criticise my hon. Friend the Member for Edinburgh, Central (Sir A. Fletcher)—


unfortunately he is not in the Chamber at the moment—because he was the Minister at the time when I gave him the early evidence that I had, which stands up to close examination, that there was skulduggery going on in the City.
My hon. Friend let the Scottish whisky industry down and it is no good for him to call foul. We would not have faced the ghastly problems of Distillers if the problems had been dealt with during the takeover of Bells. Ernest Saunders used the same tactics and the same strategy with Bells, but the funds used were smaller. I know that, because I was followed by a private investigator during the period of the Bells takeover. He must have been rather disappointed, because my life is not that exciting. Nevertheless, I know that I was followed, as were the directors of Bells.
There is much that I wish to say about this, but I hope that the situation of the employee shareholders will be looked at. I hope that a formula to return Bells to its former directors and employee shareholders will be found and we can get rid of the greed, skulduggery and political ineptness that have brought us to this situation today.

Mr. Robin Cook: For the first time since the hon. Member for Tayside, North (Mr. Walker) entered the House, I can say that it is a pleasure to follow him. Lest that comes as too much of a shock to my colleagues, let me explain that I represent one of the two main production centres for Bells whisky and I accompanied the hon. Gentleman when he went to see the hon. Member for Edinburgh, Central (Sir A. Fletcher). In the light of what has happened since, I rather wish that he had agreed to our representations to refer the Guinness bid for Bells to the Monopolies and Mergers Commission. Perhaps, in the light of his deep knowledge of the subsequent bid by Guinness for Distillers, he can now see the force of the arguments that we put to him.

Sir Alex Fletcher: I am sorry that I did not hear all the speech of my hon. Friend the Member for Tayside, North (Mr. Walker) but I can guess those remarks that I did not hear. However, there was no evidence presented by anyone during my time as a Minister in the Department of Trade and Industry to show that there was any misconduct by Guinness or anyone else in the course of the takeover bid for Bells.

Mr. Cook: That is what the takeover panel says about the Guinness-Distillers bid, a point to which I shall return.
I shall refer to many of the speeches made today, but the House will expect me to make the core of my remarks, around which I shall weave these references, the revelations that we have had in the past month about the way in which the City operates. These have made the business pages of the newspapers much the most interesting and entertaining pages, reporting as they do flights of creative energy that we cannot discover on the arts pages.
It is now evident that Guinness succeeded in beating off its Argyll rival for Distillers by a touch of more than pure genius. It was partly, at least, secured by the use of a war chest of £25 million, disbursed to members of the concert party. I understand that the £25 million was paid by means of petty cash invoices. Guinness is a large company, especially now that it has swallowed Bells and Distillers,

but even a company as large as that is not accustomed to handling £25 million through petty cash. Payments have been made to several people who have been named tonight—Gerald Ronson, Sir Jack Lyons, S. and W. Berisford. I noticed the rather plaintive observation of Jacob Rothschild's J. Rothschild Holdings the other week:
We appear to have been one of the few investors in Guinness which did not receive a kick-back for its help. We were a genuine part of the fan club.
I am not sure whether the second sentence is offered in explanation of why it did not get the kick-back or a complaint about not getting the kick-back.
An obvious series of questions flows from these revelations. The first and most clear is: is Guinness an isolated affair? Is it without parallel in the recent history of the City? Are there any comparable cases? We have the intriguing remark of Lord Hanson, who, rather unfortunately, said on 9 April 1986:
Guinness … are doing so many of the things we are doing in our fight for Imperial.
I have no doubt that if he could have his time over again, he would phrase that rather more felicitously.
The question whether there are any parallels is prompted by one or two considerations, of which the first is that Guinness is not the only company to have launched a takeover bid and discovered to its surprise its share price rising during the course of that bid. One need look no further than the case of the Burton bid for Debenhams, which was also accompanied by an interesting rise in the share price at the time of the offer for Debenhams.
The other reason why we might speculate whether Guinness is an isolated case is the fortuitous way in which we understand that the DTI inquiry began. It began, as everybody in the world knows, because the DTI received information from the SEC which had stumbled over the link between Guinness and Boesky. The Department of Trade and Industry knew that that link was going to break on Wall street in the following week if it did not send in its people first.
The right hon. Member for Hertsmere (Mr. Parkinson) took a dim view of the SEC in America for having taken four years to nail Boesky. It is a fact that Boesky was active not simply on Wall street, but in the City. He was involved in several of the takeover deals in the City. He formed one of his major investment trusts in the City. It is true that his enthusiasm for the City was tempered by his observation that he did not care to do business there because, as he said in his delightful phrase, he found it "too leaky". Nevertheless, Mr. Boesky was very active in the City. It ill becomes the right hon. Member for Hertsmere to complain that it took the SEC four years to uncover Mr. Boesky in Wall street when he was never uncovered in any of his operations in the City.
It is fair to reflect on what happened during the Guinness bid for Distillers as a test of self-regulation or, as we now must learn to call it, practitioner-based regulation. At the heart of the failure of the regulatory system was the operation of the takeover panel. That panel is a prime example of practitioner-based regulation. It exchanges personnel with the rest of the City. One of the personnel it has exchanged is Graham Walsh who, five years ago, was its director general before he transferred back to Morgan Grenfell, from which he resigned earlier this month having discovered that his bank had helped to break the rules that he had helped to frame while he was at the takeover panel.
Where was the takeover panel when Guinness was not just breaking the takeover rules, but was comprehensively pulping them? What was it doing? Did it know? If it knew, why did it not act? If it did not know, why did it not know? It has no excuse. We know that the Argyll group made sure that it was informed about the suspicious and curious things happening to Guinness shares.
In The Independent this morning Sir Martin Jacomb observed that the takeover panel should not be thrown to the wolves. I would not adopt that course of action. That appears to be the Lord Avebury solution. I believe that Sir Martin is missing the point. The point is not whether the takeover panel should be thrown to the wolves, but why it failed to notice such a large ravenous wolf in its own backyard.
I listened with interest to the Secretary of State talking about setting up another review. I hope that it will report earlier than the review on competition policy which, as I understand it, will not report until the end of the year. He would have been spared the need to set up such a review if he had accepted the many offers of advice and the many amendments tabled during the passage of the Financial Services Act 1986 and taken the opportunity to put the takeover panel on a proper statutory basis.
Another area of concern in the Guinness scandal is how it was so easy for Guinness, having embarked on its course, to find so many willing accomplices in the City. My hon. Friend the Member for Rhondda (Mr. Rogers) made a characteristically robust and fearless contribution to the House. However, I differ from him in the emphasis that he placed on crime in the City. I do not take the view that all those who operate in the City are crooks. I would go so far as to say that most of those in the City would not knowingly break the law. Over the past three months I have met many people operating in the City on many different occasions. I have not been invited to chateau Morgan Grenfell, which I understand is located in Whitehall court. However, I have met many operators in the City and it is clear that many of them —[Interruption.] My right hon. Friend the Leader of the Opposition holds out the prospect that I will be invited. I hope that this speech has drawn my absence at the chateau to the attention of those in Morgan Grenfell.
I have met many operators in the City and there is no doubt that from most of them there emanates a sense of indignation and embarrassment at the way in which the City is being portrayed in the press, because it has been let down by what they see as a minority. I accept that as a fair point of balance. Nevertheless, the awkward fact remains that Guinness had no difficulty in finding accomplices for its manoeuvre. It found plenty who were willing to help it in merchant banks and among the stockbroker community. Since we have talked much about merchant bankers, I wish to say something about stockbrokers.
We have as our first witness Mr. Parnes. He was described by Gerald Ronson as "an eminent broker" which immediately prompted the wonderful spectacle of top City stockbrokers hurrying to the press to say that they were not eminent brokers.
As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) reminded us, and as my hon. Friend the Member for Hackney, South and

Shoreditch (Mr. Sedgemore) said in an entertaining speech, Mr. Parnes has apparently been known for a long time in the City as "the animal".
One of the things that fascinates me about each successive Guinness revelation is that every time someone is named there are always two dozen people around to say, on an unattributable basis, that they always knew that he was a bad apple and that he was suspect. Mr. Parnes turns out to be a case in point. Nevertheless Mr. Parnes, having got Mr. Ronson's commission, successfully placed it through Alexanders, Laing and Cruickshank, which handled all Mr. Parnes' business and also, of course, took its half of the commission, worth £500,000.
To put it mildly, the supervision at Alexanders, Laing and Cruickshank does not appear to have been of the best, which may make it regrettable that the Secretary of State has appointed the chief executive of Alexanders, Laing and Cruickshank as one of the members of the Securities and Investments Board to oversee the whole of the City.
Mr. Parnes' tie with Alexanders, Laing and Cruickshank has now been severed. He is, interestingly, the only broker to have been thrown overboard in the past month. He is the only broker who has been involved in the share deals worth £500 million, involving perhaps one third of the entire Guinness stock, who has been caught out. I must ask the House: what about Cazenove? Cazenove was the regular broker of Guinness and handled all its share purchasing and sales. As any other stockbroker would do when acting for a client, Cazenove monitored all the purchases and sales of Guinness shares. I can reveal to the House that on 6 May, the settlement day after the closure of the bid for Distillers, Cazenove purchased 20 million shares in Guinness for Cazenove nominees. That was, of course, the same day on which Morgan Grenfell paid £7·5 million to Henry Ansbacher for Down Nominees. It is an irresistible conclusion that that payment by Cazenove on the same day was for the same purpose, to pay off some members of the concert party who had bought Guinness shares on a temporary basis during the bid for Distillers to drive up the price.

Mr. Rogers: They are all crooks.

Mr. Cook: A minority are. My emphasis is different from that of my hon. Friend. This again poses an interesting test of self-regulation because the body that would be responsible for scrutinising the actions of Cazenove is the stock exchange — one of the self-regulating organisations appointed under the Financial Services Act. The stock exchange has signally failed to achieve the same changes at Cazenove that the Bank has manifestly secured at Morgan Grenfell and leaves one with the doubt that it finds Cazenove too big, too prestigious or perhaps too influential within the stock exchange for it to take effective action against them.
We now turn from the stock exchange and the City to the Conservative party. I have been greatly interested in the change in rhetoric that I have witnessed in the short time in which I have held the portfolio for the Labour party. The fact that the Government did nothing effective at the time of the bid to stop the City's excesses has not stopped them pouring forth a spate of speeches in the past month promising vengeance on it for being so troublesome to them. I notice that one Minister was quoted on an unattributable basis in the Financial Times as saying:
The quicker we put the handcuffs on somebody the better.
We now have the proposition that those caught insider dealing and sentenced will be liable to a penalty of seven year's imprisonment. I presume that that is what Conservative Members would describe as the longer-term view of financial services.
I speak for the whole of the Opposition. We welcome the new commitment by the Conservatives to bringing City fraud to book. It sits a bit oddly with their record of the past six years—with 110 references of suspected insider dealing passed to them by the stock exchange as a result of which only nine people were prosecuted, none of whom has spent a single day in prison. It sits a bit oddly with the couple of dozen cases that they have been sitting on for a couple of years, referred to them by Lloyd's insurance as cases meriting prosecution. It sits a bit oddly with the failure for several years to attempt to extradite Peter Cameron-Webb from Florida, where he is sitting on top of the £38 million that he siphoned away. It sits oddly with the failure to bring a single prosecution arising out of the Johnson Matthey Bankers scandal, which is one of the biggest banking scandals since the war.
My hon. Friend the Member for Workington (Mr. Campbell-Savours) made a plea to the Minister to act on a firm whose name, understandably, he was not prepared to disclose to the House. I understand that he has passed information to the Minister. I say to my hon. Friend only that I hope that the Department of Trade and Industry is swifter in acting on the case that he has passed to it than on the other licensed dealers, Ravendale, which was closed only two years after it was being regularly exposed in the Sunday papers.
However, let us be generous. Let us not complain that the Government have tacked with the wind now that the climate has changed. However, we must say to them that they cannot reduce the lessons of Guinness to a simple matter of law and order. The issue of Guinness begs wider questions about the abuse of corporate power and about the new culture in the City, which means that in certain quarters of the City, apparently, there is a willingness to tolerate the excesses that Guinness represented; a new culture that was partly fostered by the Government, who have passed easy pickings to it in the form of the privatisation programme. They have also helped to fashion the City in the image of their own ideology. It is a completely free market, deregulated by Government, not burdened by an obtrusive Government body to supervise it, and allowed to pursue without check the dictates of market forces with the net result that it is repugnant to the public and embarrassing to the Government. Self-regulation needs self-restraint, and that is conspicuously lacking in the City today.
The most fundamental lesson from the Guinness affair is that the City and business must shift their priorities from chasing the acquisition of each other back to investing in the future of the companies and developing real machinery, real plants and real jobs.
Guinness was at the flood of takeover bids. It is the high-water mark. The strength of that tide was remarkable. In 1983, £2 billion was staked in takeover bids. In 1986, £16 billion was staked in takeover bids—37 per cent. of all investment capital made available in 1986. The irony is that at the very time when that takeover stampede was accelerating in pace, the Conservatives restricted the grounds on which they would make a reference of a takeover to the Monopolies and Mergers Commission panel. They bound themselves voluntarily to

confining references to competition and excluded the wider considerations of the public interest, which they are entitled to consider in terms of the law. They have left the public interest to be safeguarded by shareholders.
It is no disrespect to shareholders to say that they are not there to safeguard the public interest. They are there to safeguard their shares. That, of course, is what they do. It is the Conservative Government who are charged with the important duty of safeguarding the public interest, and that is what they have now failed to do.
Labour Members do not speak on these matters from a purely academic perspective. I want to conclude on a personal note as Conservative Members have on many occasions during this debate referred to their experiences in the City. I want to share with the House a recent experience in my constituency. At the end of last week a company operating in my constituency announced the closure of a plant within the Golden Wonder group with the loss of 350 permanent jobs and 150 seasonal jobs, which usually last for several months.
My hon. Friend the Member for Linlithgow (Mr. Dalyell) is aware of the closure because many of those operating the plant live in his constituency. The relevance of the closure to the debate is that the company has been sold and resold over the heads of its workers. It has had three owners in two years. One of those owners was the Hanson Trust which has just broken an undertaking not to sell the company that it had acquired from the Imperial Group. The latest owners are the Dalgety food group. That company acquired the firm three months ago. Only three months later, it announced the closure, although the plant has the most modern machinery in the group, machinery which Dalgety proposed to strip and remove although it was installed only last year with the help of a development grant from the Scottish Office.
I am sure that I speak for my hon. Friends when I say that I find it deeply offensive that a company which has owned a plant for only three months should shut it down without consultation, while refusing negotiations with the work force, many of whom have worked in the plant for 20 years. It is not just plant and machinery that change hands in a takeover. The work force which operates that machinery also changes hands. The job security of employees and the economic prosperity of communities cannot be left to be auctioned in the City.
The truth is that the City has shown verve, enthusiasm, imagination and initiative in speculating with the ownership of British industry. However, it has shown scant interest in investing in the development of that industry. It has done itself proud, but it has failed the needs of the real economy. That is why we shall vote against the Government, who have proved the willing accomplice of the City.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard): I want to begin by welcoming the return of the hon. Member for Livingston (Mr. Cook) to these rather down-to-earth matters. He has had his mind on higher things in recent days. He made a characteristically robust contribution to the debate, and I shall have a word or two to say about his comments in due course.
No one listening to the speeches by Opposition Members would have the faintest idea that we have been discussing one of the most successful sectors of the British


economy. Quite apart from its contribution to British business, London attracts huge volumes of business which has no natural reason to come here. There is no law of nature which compels Australian owners to insure the risks that they incur in the United States of America with London insurers, or which compels West German purchasers of Japanese shares to deal through London stockbrokers or Dutch borrowers to raise Swiss currency through London bankers. This business is conducted in London because the City is efficient, competitive and convenient. We should always bear that in mind when considering the criticisms that have been made about the City.
I want to consider some of the criticisms that have been made. We have heard a good deal about short-termism. However, it is not true to suggest that the stock exchange in particular or the City in general is incapable of looking to the long term. My hon. Friend the Member for St. Albans (Mr. Lilley) quoted some specific examples. In general, companies whose shares are quoted on the stock exchange are not all rated equally. There are wide variations between the price-earnings ratios of different shares. These reflect the different long-term outlook that different companies face. Proper information must be given. If a company is spending a great deal on research and development, the financial world must be told. If that expenditure is likely to leave a temporary depression in profits, companies should be open about it. If the institutions, whose liabilities, by and large, are extremely long-term, are kept in the picture, they are perfectly capable of taking a long-term view.
Many of those who spoke in the debate, not least the hon. Member for Livingston, commented on takeovers. In this area our policy is under review, but whatever their views on current policy, few objective observers would view with anything other than extreme alarm the proposals made yesterday by the Labour finance and industry group and commended enthusiastically outside the House by the hon. Member for Livingston, who is a member of that group, but not mentioned at all during the debate either by the right hon. and learned Member for Monklands, East (Mr. Smith) or by the hon. Member for Livingston.
Let us spend a moment or two discussing those proposals. They would involve the vetting of almost every merger — it would involve hundreds of commercial transactions every year—by the Office of Fair Trading and, acting as an appeal body, the Monopolies and Mergers Commission. That would represent a massive increase in bureaucracy and would dramatically increase the burden on companies which are the targets of bids as well as the bidders. The criteria on which bids are to be vetted are, to say the least, confused. On page 17 of the document we read that competition may play a relatively small part in these matters, but on page 12 we are promised legislation to incorporate articles 85 and 86 of the treaty of Rome directly within our law and to apply them to purely domestic mergers. It is a pity that the person who wrote page 17 was not told about that, because those articles are based fairly and squarely on competition.
Most disturbing of all, under Labour, the Office of Fair Trading and the Monopolies and Mergers Commission would no longer be independent bodies. They would be staffed by people with a political and ideological

understanding of Labour party policy. They would be selected on the ground of their political inclinations—those are the words in the report. Under a Labour Government, one would need a party card to get a job with the Office of Fair Trading or the Monopolies and Mergers Commission.
I contrast that attitude with the attitude that this Government have taken to those bodies. I remind the House that the present Director General of Fair Trading was appointed by the Labour Government in 1976 and that the present chairman of the Monopolies and Mergers Commission was appointed by a Labour Government. Both have rendered distinguished, independent public service since then and have been reappointed to their posts by this Government. There would be no place for that approach if the Labour party was again concerned with such matters. That document says much about the reality of Labour's policies when one gets behind the rose-tinted facade.
The hon. Member for Stockton, South (Mr. Wrigglesworth), on behalf of the Social Democratic party, suggested two possible changes to takeover policy. He suggested changing the burden of proof and giving direct access to the courts to individuals and companies affected. Those ideas will be considered during the review, but it is clear that they could not conceivably lead to the advantages which the hon. Gentleman claims for them. He said that they would streamline the system, that they would make it quicker and simpler. How reversing the burden of proof and thus involving, in common with the policy of the official Opposition, the reference of almost every merger so that that burden can be discharged could conceivably be described as making the process quicker and simpler is beyond credibility. It is hardly surprising if the hon. Gentleman's party's policies are not taken seriously, either inside or outside the House, if it continues to make such extravagant and far-fetched claims about the significance of the policies that it advocates.
My hon. Friend the Member for Hastings and Rye (Mr. Warren) raised a series of interesting points, perhaps slightly outside the mainstream of discussion, in relation to which he has already received letters from my right hon. Friends the Prime Minister and the Secretary of State. Perhaps he will forgive me if I do not add to those letters during these observations.
My hon. Friend the Member for Edinburgh, Central (Sir A. Fletcher) spoke about the takeover panel and made a number of points about the possibility of changing the way in which the panel operates. My right hon. Friend the Secretary of State dealt with that point in his remarks this afternoon. I have nothing to add.
The hon. Member for Great Grimsby (Mr. Mitchell) called, perhaps a trifle surprisingly, for greater shareholder control. He said that the Government should return the control of companies to their shareholders. I was under the impression that shareholders had control of their companies and that that was why Opposition Members were unhappy with our policy on mergers. They constantly claim that we should not leave decisions of this kind to shareholders. Of course, the City's success brings obligations with it. We have legislated to ensure that those obligations are recognised and discharged. The law must be observed. The action that we have taken demonstrates our determination to ensure that it will be observed.
Many hon. Members have expressed concern about some of the events that have been reported in the


newspapers in recent weeks, and I share that concern, but they are not grounds for criticism of the Government. As soon as we had good grounds for taking action, we acted. It may be recalled that when I appointed inspectors to investigate the affairs of Guinness plc many thought and wrote that I had beeen precipitate. What subsequently has come to light provides ample vindication of my decision and of my determination vigorously to enforce the law.

Mr. Allan Rogers: The Minister said that he will be assiduous in prosecuting people who have broken the law. How is it that only 18 cases were brought in 1981 and 1984?

Mr. Howard: I am not entirely certain to which cases the hon. Gentleman is referring. If evidence exists that justifies cases being brought before the courts, they will be brought before the courts.

Mr. Campbell-Savours: We understand that there may well be prosecutions under the Companies Act 1985. Will the Minister not rule out prosecutions under the 1977 criminal law, which provides for prosecutions when conspiracy has taken place? There may be persons who conspired with Guinness to break the law under section 151.

Mr. Howard: I rule out no prosecutions when evidence is available and justifies a charge being brought.
The inquiry into Guinness plc is proceeding under the Companies Act. The inspectors, although appointed by me, are entirely independent. They have far-reaching powers. They may call for documents, examine witnesses on oath, and require witnesses to answer questions even if such answers involve self-incrimination.
There have been calls, principally from the Opposition Front Bench, for an interim report, but the inspectors have told me that that would impede their inquiry. To compile it they would have to turn from their investigations and call a halt to their inquiry. They would have to devote their energies to the demanding procedure that must be followed before any report, full or interim, can be published if it is to contain any criticism of any individual. Of all the half-baked suggestions that have emanated from the Opposition in recent weeks, that suggestion —persisted in long after the effects were explained to them—was probably the most inept. I am not prepared to contemplate any action that would impede the independent inspectors as they set about their task. Their inquiry must be full and thorough, and I shall not take any action that would detract from that objective.

Mr. Robin Cook: I entirely concur with the hon. and learned Gentleman's wish to put no impediment in the path of the inquiry into the Guinness affair. Does he recall his answer to a question from me last week, which showed that the average time taken by a DTI inquiry to come to final report is 36 months and two weeks? In the light of that extraordinary time scale, is he satisfied that his Department is sufficiently swift in carrying out its inquiries.

Mr. Howard: We have taken steps to ensure that this inquiry is completed in the shortest possible time that is consistent with a full, thorough and effective report. The inspectors are devoting all their time to the inquiry, they have all the resources that they need to carry out their investigation and they are very conscious of the need for expedition.
As I said previously, the inspectors do not have to wait until they submit a report before they can submit to me any evidence of criminal activity that they discover. Nor is it necessary for them to complete their report before criminal charges can be laid if the evidence justifies that. The inspectors are well aware of their powers in that respect and I have encouraged them to make full use of them. If, at any time, it becomes appropriate for prosecutions to be commenced, commenced they will be.

Mr. Allan Rogers: During my speech I asked the Minister to tell us how many additional inspectors had been engaged. In 1985, 21 inspectors were investigating billions of pounds of City fraud, compared with the thousands who were investigating social security fraud. How many additional inspectors have been engaged since 1985?

Mr. Howard: The hon. Gentleman misunderstands the position. I explained that the Inspectors whom we appoint under the Companies Act and in connection with insider dealing—a subject to which I shall come in a moment—are independent. They are appointed for the purpose of carrying out specific inquiries. We shall continue to appoint inspectors to carry out such inquiries wherever and whenever we have the evidence to justify doing so. There is no restriction on the resources available to them for that purpose.
As my right hon. and learned Friend said, when the Opposition were in power they never got around to making insider dealing an offence. It was this Government who took that step in 1980, and it is this Government who have taken steps to enable evidence to be obtained if the offence is to be made to stick.
My right hon. Friend described the powers in the Financial Services Act for the purpose, but they were described as draconian by the Opposition spokesman in another place. They take away from anyone suspected of the offence the right to silence so as not to incriminate himself. They far exceed the powers available to the Securities and Exchange Commission. They are certainly not available to anyone investigating social security fraud — the Opposition's favourite comparison. Like the powers available under the Companies Act, they are available to independent inspectors appointed by the Secretary of State.
The Opposition constantly hark back to the inadequate record on prosecutions for insider dealing before the powers were available. It is precisely because we recognised that the record was inadequate that we took increased powers. My right hon. Friend the Secretary of State has explained how speedily we have brought them into effect.

Mr. John Butterfill: Is it not true that the Opposition in another place tried to water down the powers that we were giving to inspectors under sections 147 and 148, by moving an amendment to that effect?

Mr. Howard: I have looked at the amendments which were put down in another place on this matter and I think that my hon. Friend is probably correct, but the discussion that took place was so inordinately complicated that, frankly, I gave up the task of trying to discover whether the effect would be to whittle down those powers.
The motion before the House this evening calls for a statutory independent commission to supervise financial


services. We have heard that phrase before. We have been asking for more than a year now what it means. When the hon. Member for Dagenham (Mr. Gould), who was his party's spokesman on these matters, during the passage of the Financial Services Bill disclaimed the Securities and Exchange Commission as a model, he said that in looking for a model he would not look to that commission, and he made certain criticisms of it. The hon. Member for Livingston, by contrast, and with a touching if uncharacteristic faith in transatlantic models, seems very keen on the Securities and Exchange Commission. The right hon. and learned Member for Monklands, East, speaking earlier this afternoon, said that he was looking for something not precisely the same as the Securities and Exchange Commission.
Not one of those hon. Members has told us what powers such a body would possess which the regulatory authorities established under the Financial Services Act will not have. Nor have they told us how, in particular, such a body could be expected to be more effective in the exercise of its power than the regulatory authorities set up under the Financial Services Act will be. If any of those Opposition Members wishes to take the opportunity now to identify a single power which the body would have, were it made statutory, and which the regulatory authorities to be established under the Financial Services Act will not have, I shall gladly give him the opportunity of making that plain to the House and to the country.

Mr. Robin Cook: I rest with the single illustration, which will serve for the present, of the amendment, which the hon. and learned Gentleman himself resisted in Committee, to give the SIB the same powers as he is so proud of having taken in relation to insider dealing, but which he resisted in Committee precisely because the SIB was not a statutory body.

Mr. Howard: The hon. Gentleman is wrong. It is perfectly true that we have decided not to give the SIB those particular powers, but it has nothing to do with its not being a statutory body. As I have indicated, the powers which are given to inspectors to investigate this particular offence, comparable only to the powers available to inspectors under the Companies Act, are draconian in the extreme. They are unprecedented in our legislation and are not available to the Securities and Exchange Commission. Powers of that kind should be exercised only by inspectors directly appointed by the Secretary of State because he is directly accountable to the House.
The hon. Member for Great Grimsby seemed to be unaware, despite the fact that he served on the Financial Services Bill Committee, that the SIB would have the power to prosecute. I have beside me a list of about a dozen offences on which the SIB could prosecute when powers are transferred to it, should it be designated by the Secretary of State.
Opposition Members have been content to mouth slogans, in the hope that no one will ask them questions or insist on answers to those questions. We do not think in slogans. We are putting into place a tough and effective system for regulating the financial services industry. We are determined to ensure that the City maintains the highest standards of conduct, and we look forward to its continuing success. I urge the House to reject the motion.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 181, Noes 283.

Division No. 75]
[10 pm


AYES


Abse, Leo
Gilbert, Rt Hon Dr John


Adams, Allen (Paisley N)
Godman, Dr Norman


Alton, David
Golding, Mrs Llin


Anderson, Donald
Gould, Bryan


Archer, Rt Hon Peter
Gourlay, Harry


Ashley, Rt Hon Jack
Hamilton, James (M'well N)


Ashton, Joe
Hamilton, W. W. (Fife Central)


Atkinson, N. (Tottenham)
Hart, Rt Hon Dame Judith


Bagier, Gordon A. T.
Hattersley, Rt Hon Roy


Banks, Tony (Newham NW)
Healey, Rt Hon Denis


Barron, Kevin
Heffer, Eric S.


Beckett, Mrs Margaret
Hogg, N. (C'nauld &amp; Kilsyth)


Bell, Stuart
Holland, Stuart (Vauxhall)


Benn, Rt Hon Tony
Home Robertson, John


Bennett, A. (Dent'n &amp; Red'sh)
Howarth, George (Knowsley, N)


Bermingham, Gerald
Howell, Rt Hon D. (S'heath)


Bidwell, Sydney
Hoyle, Douglas


Blair, Anthony
Hughes, Robert (Aberdeen N)


Boothroyd, Miss Betty
Hughes, Roy (Newport East)


Boyes, Roland
Hughes, Sean (Knowsley S)


Bray, Dr Jeremy
Hughes, Simon (Southwark)


Brown, Gordon (D'f'mline E)
Janner, Hon Greville


Brown, Hugh D. (Provan)
Jenkins, Rt Hon Roy (Hillh'd)


Brown, N. (N'c'tle-u-Tyne E)
John, Brynmor


Brown, Ron (E'burgh, Leith)
Jones, Barry (Alyn &amp; Deeside)


Buchan, Norman
Kaufman, Rt Hon Gerald


Caborn, Richard
Kennedy, Charles


Callaghan, Rt Hon J.
Kinnock, Rt Hon Neil


Callaghan, Jim (Heyw'd &amp; M)
Lambie, David


Campbell-Savours, Dale
Lamond, James


Canavan, Dennis
Leadbitter, Ted


Carter-Jones, Lewis
Leighton, Ronald


Clark, Dr David (S Shields)
Lewis, Terence (Worsley)


Clarke, Thomas
Litherland, Robert


Clay, Robert
Lloyd, Tony (Stretford)


Clelland, David Gordon
Lofthouse, Geoffrey


Clwyd, Mrs Ann
Loyden, Edward


Cocks, Rt Hon M. (Bristol S)
McCartney, Hugh


Cohen, Harry
McDonald, Dr Oonagh


Conlan, Bernard
McKay, Allen (Penistone)


Cook, Frank (Stockton North)
MacKenzie, Rt Hon Gregor


Cook, Robin F. (Livingston)
McTaggart, Robert


Corbett, Robin
McWilliam, John


Craigen, J. M.
Madden, Max


Crowther, Stan
Marek, Dr John


Cunliffe, Lawrence
Marshall, David (Shettleston)


Dalyell, Tam
Martin, Michael


Davies, Rt Hon Denzil (L'lli)
Mason, Rt Hon Roy


Davies, Ronald (Caerphilly)
Maxton, John


Davis, Terry (B'ham, H'ge H'l)
Maynard, Miss Joan


Deakins, Eric
Meacher, Michael


Dewar, Donald
Michie, William


Dixon, Donald
Mitchell, Austin (G't Grimsby)


Dobson, Frank
Morris, Rt Hon A. (W'shawe)


Dormand, Jack
Morris, Rt Hon J. (Aberavon)


Douglas, Dick
Nellist, David


Dubs, Alfred
Oakes, Rt Hon Gordon


Dunwoody, Hon Mrs G.
O'Brien, William


Eadie, Alex
O'Neill, Martin


Eastham, Ken
Park, George


Evans, John (St. Helens N)
Patchett, Terry


Fatchett, Derek
Pavitt, Laurie


Faulds, Andrew
Pendry, Tom


Field, Frank (Birkenhead)
Pike, Peter


Fields, T. (L'pool Broad Gn)
Powell, Raymond (Ogmore)


Fisher, Mark
Radice, Giles


Flannery, Martin
Randall, Stuart


Foot, Rt Hon Michael
Raynsford, Nick


Forrester, John
Redmond, Martin


Foulkes, George
Rees, Rt Hon M. (Leeds S)


Fraser, J. (Norwood)
Richardson, Ms Jo


Freud, Clement
Roberts, Ernest (Hackney N)


George, Bruce
Robertson, George






Rogers, Allan
Straw, Jack


Rooker, J. W.
Thomas, Dafydd (Merioneth)


Ross, Ernest (Dundee W)
Thompson, J. (Wansbeck)


Rowlands, Ted
Thorne, Stan (Preston)


Sedgemore, Brian
Tinn, James


Sheerman, Barry
Torney, Tom


Sheldon, Rt Hon R.
Wardell, Gareth (Gower)


Shore, Rt Hon Peter
Wareing, Robert


Short, Ms Clare (Ladywood)
Weetch, Ken


Short, Mrs B.(W'hampt'n NE)
Welsh, Michael


Silkin, Rt Hon J.
White, James


Skinner, Dennis
Wigley, Dafydd


Smith, Rt Hon J. (M'ds E)
Williams, Rt Hon A.


Snape, Peter
Winnick, David


Soley, Clive
Young, David (Bolton SE)


Spearing, Nigel



Steel, Rt Hon David
Tellers for the Ayes:


Stewart, Rt Hon D. (W Isles)
Mr. Frank Haynes and


Stott, Roger
Mr. Chris Smith.


Strang, Gavin





NOES


Aitken, Jonathan
Clark, Dr Michael (Rochford)


Alexander, Richard
Clark, Sir W. (Croydon S)


Alison, Rt Hon Michael
Clarke, Rt Hon K. (Rushcliffe)


Amess, David
Clegg, Sir Walter


Ancram, Michael
Cockeram, Eric


Arnold, Tom
Colvin, Michael


Ashby, David
Conway, Derek


Ashdown, Paddy
Coombs, Simon


Aspinwall, Jack
Cope, John


Atkins, Rt Hon Sir H.
Cormack, Patrick


Atkins, Robert (South Ribble)
Cranborne, Viscount


Atkinson, David (B'm'th E)
Critchley, Julian


Baker, Nicholas (Dorset N)
Crouch, David


Baldry, Tony
Currie, Mrs Edwina


Batiste, Spencer
Dicks, Terry


Beaumont-Dark, Anthony
Dorrell, Stephen


Beith, A. J.
Douglas-Hamilton, Lord J.


Bellingham, Henry
Dover, Den


Bendall, Vivian
du Cann, Rt Hon Sir Edward


Benyon, William
Durant, Tony


Bevan, David Gilroy
Dykes, Hugh


Biffen, Rt Hon John
Edwards, Rt Hon N. (P'broke)


Biggs-Davison, Sir John
Evennett, David


Blackburn, John
Eyre, Sir Reginald


Body, Sir Richard
Fallon, Michael


Bonsor, Sir Nicholas
Farr, Sir John


Boscawen, Hon Robert
Favell, Anthony


Bottomley, Peter
Fenner, Dame Peggy


Bottomley, Mrs Virginia
Fletcher, Sir Alexander


Bowden, Gerald (Dulwich)
Fookes, Miss Janet


Boyson, Dr Rhodes
Forman, Nigel


Braine, Rt Hon Sir Bernard
Forsyth, Michael (Stirling)


Brandon-Bravo, Martin
Fowler, Rt Hon Norman


Bright, Graham
Franks, Cecil


Brinton, Tim
Fraser, Peter (Angus East)


Brittan, Rt Hon Leon
Freeman, Roger


Brooke, Hon Peter
Fry, Peter


Brown, M. (Brigg &amp; Cl'thpes)
Gale, Roger


Browne, John
Galley, Roy


Bruce, Malcolm
Gardiner, George (Reigate)


Bruinvels, Peter
Gardner, Sir Edward (Fylde)


Bryan, Sir Paul
Garel-Jones, Tristan


Buchanan-Smith, Rt Hon A.
Gilmour, Rt Hon Sir Ian


Buck, Sir Antony
Glyn, Dr Alan


Bulmer, Esmond
Goodhart, Sir Philip


Burt, Alistair
Goodlad, Alastair


Butcher, John
Gow, Ian


Butler, Rt Hon Sir Adam
Gower, Sir Raymond


Butterfill, John
Grant, Sir Anthony


Carlile, Alexander (Montg'y)
Gregory, Conal


Carlisle, John (Luton N)
Griffiths, Sir Eldon


Carlisle, Rt Hon M. (W'ton S)
Griffiths, Peter (Portsm'th N)


Carttiss, Michael
Grist, Ian


Cash, William
Ground, Patrick


Channon, Rt Hon Paul
Grylls, Michael


Chapman, Sydney
Gummer, Rt Hon John S


Chope, Christopher
Hamilton, Hon A. (Epsom)


Churchill, W. S.
Hamilton, Neil (Tatton)



Hampson, Dr Keith
Marshall, Michael (Arundel)


Hancock, Michael
Mather, Sir Carol


Hanley, Jeremy
Maude, Hon Francis


Hannam, John
Maxwell-Hyslop, Robin


Hargreaves, Kenneth
Meadowcroft, Michael


Harvey, Robert
Merchant, Piers


Haselhurst, Alan
Miller, Hal (B'grove)


Hawkins, C. (High Peak)
Mills, Iain (Meriden)


Hawksley, Warren
Miscampbell, Norman


Hayhoe, Rt Hon Sir Barney
Mitchell, David (Hants NW)


Hayward, Robert
Moate, Roger


Heathcoat-Amory, David
Monro, Sir Hector


Heddle, John
Montgomery, Sir Fergus


Henderson, Barry
Moore, Rt Hon John


Heseltine, Rt Hon Michael
Morrison, Hon C. (Devizes)


Hickmet, Richard
Morrison, Hon P. (Chester)


Hicks, Robert
Moynihan, Hon C.


Higgins, Rt Hon Terence L.
Mudd, David


Hind, Kenneth
Neale, Gerrard


Hirst, Michael
Nelson, Anthony


Hogg, Hon Douglas (Gr'th'm)
Newton, Tony


Holland, Sir Philip (Gedling)
Nicholls, Patrick


Holt, Richard
Onslow, Cranley


Hordern, Sir Peter
Oppenheim, Phillip


Howard, Michael
Oppenheim, Rt Hon Mrs S.


Howarth, Alan (Stratf'd-on-A)
Ottaway, Richard


Howarth, Gerald (Cannock)
Owen, Rt Hon Dr David


Howell, Rt Hon D. (G'ldford)
Page, Richard (Herts SW)


Howell, Ralph (Norfolk, N)
Parkinson, Rt Hon Cecil


Howells, Geraint
Patten, Christopher (Bath)


Hubbard-Miles, Peter
Patten, J. (Oxf W &amp; Abgdn)


Hunt, David (Wirral W)
Pattie, Rt Hon Geoffrey


Hunt, John (Ravensbourne)
Peacock, Mrs Elizabeth


Hunter, Andrew
Percival, Rt Hon Sir Ian


Irving, Charles
Pollock, Alexander


Jackson, Robert
Porter, Barry


Jenkin, Rt Hon Patrick
Portillo, Michael


Jones, Gwilym (Cardiff N)
Powley, John


Jones, Robert (Herts W)
Prentice, Rt Hon Reg


Jopling, Rt Hon Michael
Price, Sir David


Joseph, Rt Hon Sir Keith
Proctor, K. Harvey


Kershaw, Sir Anthony
Raison, Rt Hon Timothy


Key, Robert
Rathbone, Tim


King, Roger (B'ham N'field)
Rees, Rt Hon Peter (Dover)


King, Rt Hon Tom
Rhodes James, Robert


Kirkwood, Archy
Rhys Williams, Sir Brandon


Knight, Greg (Derby N)
Ridsdale, Sir Julian


Knowles, Michael
Roe, Mrs Marion


Knox, David
Ross, Stephen (Isle of Wight)


Lamont, Rt Hon Norman
Rost, Peter


Lang, Ian
Rowe, Andrew


Latham, Michael
Ryder, Richard


Lawler, Geoffrey
Sackville, Hon Thomas


Lawrence, Ivan
Sainsbury, Hon Timothy


Lawson, Rt Hon Nigel
St. John-Stevas, Rt Hon N.


Lee, John (Pendle)
Shaw, Giles (Pudsey)


Leigh, Edward (Gainsbor'gh)
Shelton, William (Streatham)


Lester, Jim
Shepherd, Colin (Hereford)


Lewis, Sir Kenneth (Stamf'd)
Shersby, Michael


Lightbown, David
Shields, Mrs Elizabeth


Lilley, Peter
Silvester, Fred


Livsey, Richard
Sims, Roger


Lloyd, Sir Ian (Havant)
Smith, Tim (Beaconsfield)


Lloyd, Peter (Fareham)
Soames, Hon Nicholas


Lord, Michael
Stevens, Lewis (Nuneaton)


McCrindle, Robert
Stewart, Allan (Eastwood)


McCurley, Mrs Anna
Stewart, Andrew (Sherwood)


Macfarlane, Neil
Stewart, Ian (Hertf'dshire N)


MacKay, John (Argyll &amp; Bute)
Sumberg, David


Maclean, David John
Temple-Morris, Peter


McLoughlin, Patrick
Thompson, Patrick (N'ich N)


McNair-Wilson, M. (N'bury)
Thurnham, Peter


McNair-Wilson, P. (New F'st)
Townend, John (Bridlington)


McQuarrie, Albert
Twinn, Dr Ian


Madel, David
van Straubenzee, Sir W.


Major, John
Waddington, Rt Hon David


Malins, Humfrey
Wainwright, R.


Maples, John
Wakeham, Rt Hon John


Marland, Paul
Walker, Bill (T'side N)


Marlow, Antony
Waller, Gary






Warren, Kenneth



Wells, Sir John (Maidstone)
Tellers for the Noes:


Wolfson, Mark
Mr.Michael Neubert and


Wood, Timothy
Mr. Gerald Malone.


Wrigglesworth, Ian

Questions accordingly negatived

Questions, That the proposed word be there added, put forthwith pursunant to standing order No. 30(Questions on amendments):—

The House divided:Ayes 267, Noes 192.

Division No. 76]
[10.15 pm


AYES


Aitken, Jonathan
Cranborne, Viscount


Alexander, Richard
Crouch, David


Alison, Rt Hon Michael
Currie, Mrs Edwina


Amess, David
Dicks, Terry


Ancram, Michael
Dorrell, Stephen


Arnold, Tom
Douglas-Hamilton, Lord J.


Ashby, David
Dover, Den


Aspinwall, Jack
du Cann, Rt Hon Sir Edward


Atkins, Rt Hon Sir H.
Durant, Tony


Atkins, Robert (South Ribble)
Dykes, Hugh


Atkinson, David (B'm'th E)
Edwards, Rt Hon N. (P'broke)


Baker, Nicholas (Dorset N)
Evennett, David


Baldry, Tony
Eyre, Sir Reginald


Batiste, Spencer
Fairbairn, Nicholas


Beaumont-Dark, Anthony
Fallon, Michael


Bellingham, Henry
Farr, Sir John


Bendall, Vivian
Favell, Anthony


Benyon, William
Fenner, Dame Peggy


Bevan, David Gilroy
Fletcher, Sir Alexander


Biffen, Rt Hon John
Fookes, Miss Janet


Biggs-Davison, Sir John
Forman, Nigel


Blackburn, John
Forsyth, Michael (Stirling)


Body, Sir Richard
Fowler, Rt Hon Norman


Bonsor, Sir Nicholas
Franks, Cecil


Boscawen, Hon Robert
Fraser, Peter (Angus East)


Bottomley, Peter
Freeman, Roger


Bottomley, Mrs Virginia
Fry, Peter


Bowden, Gerald (Dulwich)
Gale, Roger


Boyson, Dr Rhodes
Galley, Roy


Braine, Rt Hon Sir Bernard
Gardiner, George (Reigate)


Brandon-Bravo, Martin
Gardner, Sir Edward (Fylde)


Bright, Graham
Garel-Jones, Tristan


Brinton, Tim
Gilmour, Rt Hon Sir Ian


Brittan, Rt Hon Leon
Glyn, Dr Alan


Brooke, Hon Peter
Goodhart, Sir Philip


Brown, M. (Brigg &amp; Cl'thpes)
Goodlad, Alastair


Browne, John
Gow, Ian


Bruinvels, Peter
Gower, Sir Raymond


Bryan, Sir Paul
Grant, Sir Anthony


Buchanan-Smith, Rt Hon A.
Greenway, Harry


Buck, Sir Antony
Gregory, Conal


Bulmer, Esmond
Griffiths, Sir Eldon


Burt, Alistair
Griffiths, Peter (Portsm'th N)


Butcher, John
Grist, Ian


Butler, Rt Hon Sir Adam
Ground, Patrick


Butterfill, John
Grylls, Michael


Carlisle, John (Luton N)
Gummer, Rt Hon John S


Carlisle, Rt Hon M. (W'ton S)
Hamilton, Hon A. (Epsom)


Carttiss, Michael
Hamilton, Neil (Tatton)


Cash, William
Hampson, Dr Keith


Channon, Rt Hon Paul
Hanley, Jeremy


Chapman, Sydney
Hannam, John


Chope, Christopher
Hargreaves, Kenneth


Churchill, W. S.
Harvey, Robert


Clark, Dr Michael (Rochford)
Haselhurst, Alan


Clark, Sir W. (Croydon S)
Hawkins, C. (High Peak)


Clarke, Rt Hon K. (Rushcliffe)
Hawksley, Warren


Clegg, Sir Walter
Hayes, J.


Cockeram, Eric
Hayhoe, Rt Hon Sir Barney


Colvin, Michael
Hayward, Robert


Conway, Derek
Heathcoat-Amory, David


Coombs, Simon
Heddle, John


Cope, John
Henderson, Barry


Cormack, Patrick
Heseltine, Rt Hon Michael



Hickmet, Richard
Monro, Sir Hector


Hicks, Robert
Montgomery, Sir Fergus


Higgins, Rt Hon Terence L.
Moore, Rt Hon John


Hind, Kenneth
Morrison, Hon C. (Devizes)


Hirst, Michael
Morrison, Hon P. (Chester)


Hogg, Hon Douglas (Gr'th'm)
Moynihan, Hon C.


Holland, Sir Philip (Gedling)
Mudd, David


Holt, Richard
Neale, Gerrard


Hordern, Sir Peter
Nelson, Anthony


Howard, Michael
Neubert, Michael


Howarth, Alan (Stratf'd-on-A)
Newton, Tony


Howarth, Gerald (Cannock)
Nicholls, Patrick


Howell, Rt Hon D. (G'ldford)
Onslow, Cranley


Howell, Ralph (Norfolk, N)
Oppenheim, Phillip


Hubbard-Miles, Peter
Oppenheim, Rt Hon Mrs S.


Hunt, David (Wirral W)
Ottaway, Richard


Hunt, John (Ravensbourne)
Page, Richard (Herts SW)


Hunter, Andrew
Parkinson, Rt Hon Cecil


Irving, Charles
Patten, Christopher (Bath)


Jackson, Robert
Patten, J. (Oxf W &amp; Abgdn)


Jenkin, Rt Hon Patrick
Pattie, Rt Hon Geoffrey


Jones, Gwilym (Cardiff N)
Peacock, Mrs Elizabeth


Jones, Robert (Herts W)
Percival, Rt Hon Sir Ian


Jopling, Rt Hon Michael
Pollock, Alexander


Joseph, Rt Hon Sir Keith
Porter, Barry


Kershaw, Sir Anthony
Powley, John


Key, Robert
Prentice, Rt Hon Reg


King, Roger (B'ham N'field)
Price, Sir David


King, Rt Hon Tom
Proctor, K. Harvey


Knight, Greg (Derby N)
Raison, Rt Hon Timothy


Knowles, Michael
Rathbone, Tim


Knox, David
Rees, Rt Hon Peter (Dover)


Lamont, Rt Hon Norman
Rhodes James, Robert


Lang, Ian
Rhys Williams, Sir Brandon


Latham, Michael
Ridsdale, Sir Julian


Lawler, Geoffrey
Roe, Mrs Marion


Lawrence, Ivan
Rost, Peter


Lawson, Rt Hon Nigel
Rowe, Andrew


Lee, John (Pendle)
Ryder, Richard


Leigh, Edward (Gainsbor'gh)
Sackville, Hon Thomas


Lester, Jim
Sainsbury, Hon Timothy


Lewis, Sir Kenneth (Stamf'd)
St. John-Stevas, Rt Hon N.


Lilley, Peter
Shaw, Giles (Pudsey)


Lloyd, Sir Ian (Havant)
Shelton, William (Streatham)


Lloyd, Peter (Fareham)
Shepherd, Colin (Hereford)


Lord, Michael
Shersby, Michael


McCrindle, Robert
Silvester, Fred


McCurley, Mrs Anna
Sims, Roger


Macfarlane, Neil
Smith, Tim (Beaconsfield)


MacKay, John (Argyll &amp; Bute)
Soames, Hon Nicholas


Maclean, David John
Stevens, Lewis (Nuneaton)


McLoughlin, Patrick
Stewart, Allan (Eastwood)


McNair-Wilson, M. (N'bury)
Stewart, Andrew (Sherwood)


McNair-Wilson, P. (New F'st)
Stewart, Ian (Hertf'dshire N)


McQuarrie, Albert
Sumberg, David


Madel, David
Thompson, Patrick (N'ich N)


Major, John
Thurnham, Peter


Malins, Humfrey
Townend, John (Bridlington)


Malone, Gerald
Twinn, Dr Ian


Maples, John
van Straubenzee, Sir W.


Marland, Paul
Waddington, Rt Hon David


Marlow, Antony
Wakeham, Rt Hon John


Marshall, Michael (Arundel)
Walker, Bill (Vside N)


Mather, Sir Carol
Waller, Gary


Maude, Hon Francis
Warren, Kenneth


Maxwell-Hyslop, Robin
Wolfson, Mark


Merchant, Piers
Wood, Timothy


Miller, Hal (B'grove)



Mills, Iain (Meriden)
Tellers for the Ayes:


Miscampbell, Norman
Mr. Michael Portillo and


Mitchell, David (Hants NW)
Mr. David Lightbown.


Moate, Roger





NOES


Abse, Leo
Ashley, Rt Hon Jack


Adams, Allen (Paisley N)
Ashton, Joe


Alton, David
Atkinson, N. (Tottenham)


Anderson, Donald
Bagier, Gordon A. T.


Archer, Rt Hon Peter
Banks, Tony (Newham NW)


Ashdown, Paddy
Barron, Kevin






Beckett, Mrs Margaret
Fisher, Mark


Beith, A J
Flannery, Martin


Bell, Stuart
Foot, Rt Hon Michael


Benn, Rt Hon Tony
Forrester, John


Bennett, A (Dent'n &amp; Red'sh)
Foulkes, George


Bermingham, Gerald
Fraser, J (Norwood)


Bidwell, Sydney
Freud, Clement


Blair, Anthony
George, Bruce


Boothroyd, Miss Betty
Gilbert, Rt Hon Dr John


Boyes, Roland
Godman, Dr Norman


Bray, Dr Jeremy
Golding, Mrs Llin


Brown, Gordon (D'f'mline E)
Gould, Bryan


Brown, Hugh D (Provan)
Gourlay, Harry


Brown, N (N'c'tle-u-Tyne E)
Hamilton, James (M'well N)


Brown, Ron (E'burgh, Leith)
Hamilton, W W (Fife Central)


Bruce, Malcolm
Hancock, Michael


Buchan, Norman
Hart, Rt Hon Dame Judith


Caborn, Richard
Hattersley, Rt Hon Roy


Callaghan, Rt Hon J
Healey, Rt Hon Denis


Callaghan, Jim (Heyw'd &amp; M)
Heffer, Eric S


Campbell-Savours, Dale
Hogg, N (C'nauld &amp; Kilsyth)


Canavan, Dennis
Holland, Stuart (Vauxhall)


Carlile, Alexander (Montg'y)
Home Robertson, John


Carter-Jones, Lewis
Howarth, George (Knowsley, N)


Clark, Dr David (S Shields)
Howell, Rt Hon D (S'heath)


Clarke, Thomas
Howells, Geraint


Clay, Robert
Hoyle, Douglas


Clelland, David Gordon
Hughes, Robert (Aberdeen N)


Clwyd, Mrs Ann
Hughes, Roy (Newport East)


Cocks, Rt Hon M (Bristol S)
Hughes, Sean (Knowsley S)


Cohen, Harry
Hughes, Simon (Southwark)


Conlan, Bernard
Janner, Hon Greville


Cook, Frank (Stockton North)
Jenkins, Rt Hon Roy (Hillh'd)


Cook, Robin F (Livingston)
John, Brynmor


Corbett, Robin
Jones, Barry (Alyn &amp; Deeside)


Craigen, J M
Kaufman, Rt Hon Gerald


Crowther, Stan
Kennedy, Charles


Dalyell, Tam
Kinnock, Rt Hon Neil


Davies, Rt Hon Denzil (L'lli)
Kirkwood, Archy


Davies, Ronald (Caerphilly)
Lambie David


Davis, Terry (B'ham, H'ge H'l)
Lamond, James


Deakins, Eric
Leadbitter, Ted


Dewar, Donald
Leighton, Ronald


Dixon Donald
Lewis, Terence (Worsley)


Dobson, Frank
Litherland, Robert


Dormand, Jack
Livsey, Richard


Douglas, Dick
Lloyd, Tony (Stretford)


Dubs, Alfred
Lofthouse, Geoffrey


Dunwoody, Hon Mrs G
Loyden, Edward


Eadie, Alex
McCartney, Hugh


Eastham, Ken
McDonald, Dr Oonagh


Evans, John (St Helens N)
McKay, Allen (Penistone)


Fatchett, Derek
MacKenzie, Rt Hon Gregor


Faulds, Andrew
McTaggart, Robert


Field Frank (Birkenhead)
McWilliam, John


Fields, T (L'pool Broad Gn)
Madden, Max



Marek, Dr John
Sheerman, Barry


Marshall, David (Shettleston)
Sheldon, Rt Hon R.


Martin, Michael
Shields, Mrs Elizabeth


Mason, Rt Hon Roy
Shore, Rt Hon Peter


Maxton, John
Short, Ms Clare (Ladywood)


Maynard, Miss Joan
Short, Mrs R.(W'hampt'n NE)


Meacher, Michael
Silkin, Rt Hon J.


Meadowcroft, Michael
Skinner, Dennis


Michie, William
Smith, Rt Hon J. (M'ds E)


Mitchell, Austin (G't Grimsby)
Snape, Peter


Morris, Rt Hon A. (W'shawe)
Soley, Clive


Morris, Rt Hon J. (Aberavon)
Spearing, Nigel


Nellist, David
Steel, Rt Hon David


Oakes, Rt Hon Gordon
Stewart, Rt Hon D. (W Isles)


O'Brien, William
Stott, Roger


O'Neill, Martin
Strang, Gavin


Park, George
Straw, Jack


Patchett, Terry
Thomas, Dafydd (Merioneth)


Pavitt, Laurie
Thompson, J. (Wansbeck)


Pendry, Tom
Thorne, Stan (Preston)


Pike, Peter
Tinn, James


Powell, Raymond (Ogmore)
Torney, Tom


Radice, Giles
Wardell, Gareth (Gower)


Randall, Stuart
Wareing, Robert


Raynsford, Nick
Weetch, Ken


Redmond, Martin
Welsh, Michael


Rees, Rt Hon M. (Leeds S)
White, James


Richardson, Ms Jo
Wigley, Dafydd


Roberts, Ernest (Hackney N)
Williams, Rt Hon A.


Robertson, George
Winnick, David


Rogers, Allan
Wrigglesworth, Ian


Rooker, J. W.
Young, David (Bolton SE)


Ross, Ernest (Dundee W)



Ross, Stephen (Isle of Wight)
Tellers for the Noes:


Rowlands, Ted
Mr. Frank Haynes and


Sedgemore, Brian
Mr. Chris Smith.

Question accordingly agreed to.

MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved,
That this House deplores the irresponsible attacks on the City by Her Majesty's Opposition which ignore its massive and continuing contribution to meeting the long-term financial needs of British manufacturing industry and business and more generally throughout the country to the balance of payments, and to employment in the United Kingdom; notes that investment growth has averaged 4·5 per cent. per year during this Parliament; notes with approval the consistency of the Government's mergers policy; and applauds, in particular, its firm action in particular, its firm action in establishing a regulatory framework for the city and City and its determination to root out abuses

London Regional Transport

The Minister of State, Department of Transport (Mr. David Mitchell): I beg to move,
That the draft London Regional Transport (Levy) Order 1987, which was laid before this House on 17th December, be approved.
The House will remember that in 1984 we set London Regional Transport clear policy objectives. Since then its professional management has been allowed to get on with the task without continuous political interference. Our remit was that LRT should reduce the revenue subsidy to £95 million by 1987–88. It was requested to do so by rooting out inefficiency rather than cuts in services, fare increases or a lowering of standards.
I can report substantial progress. By last year LRT had cut its need for subsidy to £97 million. It has virtually met its target two years early.

Mr. Tony Banks: The Minister said that LRT should meet its objectives without fare increases, but can he explain why, since LRT took over responsibility from the Greater London council, short hop fares have gone up by 75 per cent. in inner London and by 50 per cent. in outer London?

Mr. Mitchell: Perhaps I should not have been so courteous as to give way to the hon. Gentleman. He would have found that I shall deal with fares, and I shall be happy to do so briefly now and at length later, if he wishes me to do so.
Our remit asked LRT to reduce revenue subsidy to £95 million by 1987–88, not through cuts in services, not by large fare increases, not by lowering standards, but by rooting out inefficiency. Substantial progress was made last year. Its annual business plan, published only last month, forecast a requirement down to £92 million this year. What is even better is that the plan shows a further fall to £58 million next year, handsomely beating our target.
We asked LRT to reduce its unit costs by at least 2·5 per cent. each year in real terms. Last year, unit costs were reduced by 4 per cent. and it expects to reduce them this year by 7 per cent. on both the buses and the underground, and to secure a further reduction of 5 per cent. next year on both.
We asked LRT to bring forward a significant investment programme design to reduce future costs, modernise the system, and make it more attractive to the paying customer. LRT will spend more than £250 million this year on investment in the system. Next year, LRT's planned investment increases to £280 million. Nobody can honestly and realistically claim that this is a system in neglect.
Costs will be reduced by a massive investment programme — £135 million on the automated underground ticketing system and £50 million to replace the underground power supply with cheaper access to the national grid. A major rolling programme of station modernisation will improve the environment of the underground. On the bus system, new buses are assisting disabled passengers and improve boarding times. Automatic fare collection is also being developed, to

improve boarding speeds. A comprehensive computer system for the bus business is being installed to improve its operational and engineering efficiency.
Our objective is a thriving and well-used public transport system. On the buses, careful matching of supply to demand has stabilised patronage at about 2,700 million passenger miles, after many years of continuous decline. On the underground, patronage continues to exceed forecast increases, rising by 11 per cent. last year to 3,700 million passenger miles, with an all-time record of 762 million passenger journeys.
Our objective of a thriving and well-used system is being achieved. The Government are playing their part by approving expenditure of £45 million for the purchase of additional underground trains. I have just approved a £3 million scheme for the Tower Hill station to reduce congestion at this busy point.
We also made it clear that revenue subsidy target did not imply huge fare increases. Increases in fares are an annual catching-up exercise to restore their real value. The hon. Member for Newham, North-West (Mr. Banks) may laugh, but we shall come back to this point. The real value is eroded all the time as the retail price inflation continues through the year. LRT's annual business plan shows quite clearly that bus fares are now only about 90 per cent. of their January 1981 real value while underground fares are but 80 per cent. of that value. That is part of the answer to the hon. Gentleman. Another part of the answer is the huge increase in the number of people who are travelling, who must obviously find it an attractive fare level.

Mr. John Fraser: rose—

Mr. Mitchell: It would be better if I finished my speech, and then allowed the hon. Gentleman to take the floor.
Particular increases in individual single fares in any one year will naturally be above, or below, the average increase for the year. That is the result of a fairly simple structure of fares, while LRT's emphasis on marketing its services will change from year to year. Notably, the cost of the one zone bus pass has been unchanged since 1983.
London Regional Transport was asked to pay particular attention to the needs of the disabled. Since the demise of the Greater London council, LRT has been responsible for funding London's dial-a-ride services, on which £5 million is being spent this year. Next year we have increased provision by 20 per cent. to £6 million, including the purchase of new vehicles and facilities to improve booking efficiency. I hope that the hon. Member for Newham, North-West will cheer at that.

Several Hon. Members: rose—

Mr. Mitchell: I shall sit down shortly to give hon. Members an opportunity to participate in the debate.
Those figures compare with £4 million spent in the last year of GLC control.
LRT's services for the disabled also include the provision of wheelchair-accessible mobility buses, new design features on fleet buses and at underground stations to assist the ambulant disabled, as well as an increasing volume of information services.
Efficiency clearly brings benefits to ratepayers and taxpayers. Our first year of financial control saw a ratepayer levy of 10·8p in the pound and last year at this time I was able to bring forward proposals for a cut of 1p in the pound. The draft order before the House cuts a


further 2p in the pound off the bill rate. That is a reduction of nearly 30 per cent. in three years. By any measure, those are astonishing achievements, at the same time as maintaining the network, increasing the services and modernising the system.
I hope that the House will wish me to congratulate LRT, particularly its staff, and I accordingly commend the draft order to the House.

Mr. Roger Stott: It is almost a year since we debated the London Regional Transport (Levy) Order 1986. I remember listening to the Minister saying roughly the same thing then as he has said tonight. It is rather like watching an action replay. He says that everything is doing well, services have increased, there is no problem and that LRT is discharging its responsibilities to the maximum.
During the year Ministers in the Department of Transport have been subjected to a barrage of questions from hon. Members on both sides of the House who represent London constituencies—

Sir John Biggs-Davison: And others.

Mr. Stott: The questions were about the level of services provided by LRT. The hon. Member for Epping Forest (Sir J. Biggs-Davison) continually complains. At every Transport Question Time he rebukes his hon. Friend the Minister over the level of services available to his constituents.
As this is a short debate, I shall simply make some observations on the ramifications of the order and of the business plan that has been produced by LRT. I hope that by containing my remarks hon. Members on both sides of the House who represent London constituencies will be able to make their valued contributions to the debate.
This year the Government will provide £239 million for all LRT spending, capital and revenue. Last year they provided £295 million. The Government are allowed to recover two thirds of that money from London ratepayers, yet under this order they will again recover the maximum amount, that is, £156·9 million compared with £193·6 million last year. That is a 7·7p rate, compared with the 9p-plus rate of last year. The Government may claim that the reduction in subsidy springs, as the Minister has just told us, from efficiency. It is important to note that this difference in the rate precept will be made up not just simply by efficiency, but by £27 million in fare increases and £31 million in increases in borrowing and other external sources.
If we look at the business plan prepared by LRT, which is funded by the precept which the Minister now wishes to get through the House, we see that there will be 6,650 fewer jobs this year than there were last year. This, in my estimation, will add about £37 million to Government expenditure if all those people cannot find jobs and the Government have to provide unemployment and social security benefits, and at the same time lose taxation revenue. Revenue support for LRT will go down by £13 million and by March 1988 there will be 15,000 fewer jobs in LRT than the number approved in the final plan produced by the GLC.

Mr. Jeremy Hanley: Is the hon. Gentleman aware that London has the highest ever level of jobs vacant in its history?

Mr. Stott: Inherent in the financial structure under the order is the deliberate creation of unemployment. I shall not concede to the hon. Gentleman that those people will immediately get jobs, but in the intervening period it will be a contingency on Government expenditure if those people are made unemployed. I shall leave my hon. Friends who represent London constituencies to answer the question about unemployment in London, but I know that if we made any bus conductors redundant in Wigan they would not find a job within two years of being made redundant, if ever, and that is directly due to the Government's economic policy.

Mr. Frank Dobson: Does my hon. Friend agree that, according to figures issued by the Department of Employment — Conservative Members can attach what credence they like to these figures — there are 393,000 people unemployed in Greater London and there are 36,000 notified vacancies'?

Mr. Stott: I am grateful to my hon. Friend for putting that on the record. Perhaps, if he catches your eye, Mr. Deputy Speaker, he will make that point more forcefully than I can.
I shall continue with what I have to say, which is that the total grant from the Department of Transport will be cut by £56 million, from £295 million to £239 million, which is a decrease of 19 per cent., and LRT will be forced as a consequence to borrow £45 million to make up the difference between income and expenditure. This means that services provided in 1987–88 will have to be paid for in future years.
I deal now with bus services. One-person operation, henceforth to be known as OPO, of buses will be increased from 76 per cent. under the strategic plan to 83 per cent. of services. This in itself will cause the loss of 1,100 conductors' jobs, which is 35 per cent. of the total platform staff, mainly from inner city garages.
Let us remember that in June 1984, when the Government took over London Transport, OPO buses were running on 53 per cent. of the services. The reduction in revenue support has forced London Buses, which is wholly owned by LRT, to increase OPO. However, I am advised that to do this it needs 440 new buses, but will get only 220, and will not be able to tender for the majority of the 33 routes which have been put out to tender in 1987–88. Those routes will be simply handed over to private operators. The plan states that bus staff will have to accept
changed pay structures and working practices
if tenders are to be won. London Buses will not even be able to tender for many of those routes, irrespective of the wage demands or wage claims that people put in. At least two, possibly five, bus garages will be closed. London's red buses will operate as much as 11 per cent. fewer services than in 1986–87, which was the lowest service since London Transport was created in 1933. Some 200 jobs — 17 per cent. of the total — will be lost in bus engineering, with 1,050 jobs going in other areas, such as catering and station cleaning All this stems from what we are debating and what is contained in LRT's business plan.

Sir John Biggs-Davison: Would the hon. Gentleman care to add to what he has been saying about one-person operation and the changes in the buses in London, and mention the dislike of many of us passengers of the inflexible, unfriendly one-person-operated bus'?

Mr. Stott: The hon. Gentleman has preceded me by five seconds. I am about to deal with that precise issue.
Returning, as the words on my script say, to OPO, I readily concede that this operation can be beneficial, and is demonstrably beneficial, in areas—

Mr. John Maples: It is cheaper.

Mr. Stott: It can be demonstrated that OPO can be beneficial to the overall transport provision in certain areas. It can be proved, I concede that, but I do not believe that OPO is suitable for the nation's capital, where millions of people are conveyed by public transport every day in difficult and heavy traffic conditions. Even with the improved design of the buses that LRT wants to use for OPO, its target is a load speed of 2·5 seconds per passenger. This is still more than twice the time to load an old-fashioned Routemaster bus. The schedules are slower too—15 per cent. extra running time has to be allowed for. Nor are the financial benefits all one way with the introduction of OPO. It will take five OPO buses to replace one of the Routemaster buses currently running on the streets of London.
It is important to look not just at the savings, which the hon. Member for Lewisham, West (Mr. Maples) mentioned, through the reduction of platform staff, but at whether those savings will translate themselves into a better transportation system for the nation's capital. I do not think that they will.
I travel on London Transport from Tuesday to Thursday when I am down here, because I live in Wigan, not London. My buses coming from Kennington have a conductor. At certain times of the morning the traffic is very heavy. Although there are bus lanes for a certain length of the run, heavy congestion can still build up. I genuinely believe that if there is a move towards one-person-operated buses this can only mean longer running times, more difficulties and more traffic congestion.
Moreover, I think that the presence of a conductor not only adds to the efficiency of the running speed of buses in the city centre, but gives an unquantifiable assurance to passengers, particularly the elderly, women with shopping and children, who need to be helped on and off buses, and the disabled. That is an unquantifiable advantage which cannot be equated with pounds and shillings. The clippy—the conductor on a bus—provides a valuable service in keeping the bus moving at speed for the convenience of the people who use public transport.
There are areas where one-person-operated buses will work satisfactorily, but there are other areas where they will not. I am pleased to have the full agreement of the hon. Member for Epping Forest on that.

Mr. Nigel Spearing: Is my hon. Friend aware that the statutory London Regional Transport passengers committee has continuously supported that contention? According to the committee, the 68 per cent. of mileage operated by OPO is the maximum acceptable to Londoners, and public opinion supports that. Is he also aware that, although the Routemaster may be of elderly design, it is preferred by Londoners? If London Transport can revamp Routemasters and try to sell them to China, should they not be kept running in the central areas of London?

Mr. Stott: I absolutely agree with my hon. Friend. There is unanimity of opinion among those hon. Members

who have considered the matter seriously. They have arrived at this conclusion either because they use public transport, or because they are aware of the problems of people who use public transport. This is not an up-front political problem of great significance between the Labour and Conservative Benches. This is a matter of general common sense if we all want to achieve a proper transportation system in the nation's capital. However, I have finished with that point and I have the support of all my hon. Friends and of some Conservative Members.
The problems that will flow from the order that we are debating and the plan produced by LRT, relate mainly to the bus network. I challenge the Minister's definition of prosperity, because I believe that there has been a decline in services. Indeed, one symptom of that decline is predicted by a 9 per cent. fall in revenue, from £310 million to £282 million.
In addition, there is the problem of tendered services. Many of the services that used to be run by London Transport, by the red buses in London, are now, under the Government's free market philosophy, to be put out to tender. Those of us who have the honour to represent constituencies outside London know what happens to tendered routes following deregulation. I would not wish that on my hon. Friends who represent London constituencies.
I am advised that because of the tendered routes in certain geographical areas of London the Norbiton garage which was built in 1983, and the Plumstead garage, which was built in 1981, will be affected. If the Government intend to go ahead with their policy and put the routes out to tender, what will happen to the buses that are garaged at Norbiton and Plumstead? There has been massive public investment in new garages, yet the buses from these garages are to be subjected to tendered routes. As a consequence they may be put out of business. I am sure that some of my hon. Friends will refer to tendering.
I should deal briefly with the Underground. One person operation does not stop at buses. It is also being introduced on some parts of the Underground. One person operation on deep tube lines will be introduced for the first time on the Piccadilly and Jubilee lines, with no satisfactory evacuation or rescue procedure for trains that have broken down or whose drivers are taken ill in the tunnels. This will create a saving of less than 0·3 per cent. of London Regional Transport's total expenditure. Overall, 1,050 jobs will be lost on the Underground through a combination of more one person operated trains and a further reduction in station staffing.
I must tell the Minister that a further large reduction in station staffing will cause a serious security problem, especially late at night. People travelling late at night, with no one on those stations, could be the victims of muggings, violence and similar problems. It is money well invested to service those stations properly with adequate staff at all times when the trains are running.
I see that Conservative Members are becoming anxious about the time that I am taking—

Mr. Tony Banks: So are the people behind my hon. Friend.

Mr. Stott: And some of the people behind me, too. I get the message loud and clear, and I shall conclude my remarks.
This will probably be our last debate on London Transport before the election. When the Labour party


wins that election it will, as a matter of priority, restore local democracy to London. London Transport will be run by the elected representatives of London for and on behalf of the people of London.

Mr. John Maples: One hoped that since the hon. Member for Wigan (Mr. Stott) did not hold his present job when the Labour Front Bench was opposing the London Regional Transport Bill, he might have brought some fresh light to bear on his party's thinking, but he obviously shares all their old prejudices. He seems to believe that a public transport system is no good unless it is heavily overmanned, massively subsidised and incurring huge losses.
It is worth remembering the Greater London council's record on running London Transport. For the 12 years during which it was run by the council, unit costs increased by 66 per cent. on the buses and 50 per cent. on the underground, the subsidy increased from £5·5 million to £370 million, the revenue grant increased from zero in 1970 to £250 million in 1982 and fares increased by 85 per cent. in real terms, while passenger demand fell by 25 per cent.
As a result, the Government wisely proposed to reform the method by which London Transport was run. Against that, the GLC ran a disgraceful scare campaign about dial-a-ride, pensioners' bus passes, massive fare increases, the closure of 35 underground stations and route closures. It spent £1 million of ratepayers' money on the campaign, which was echoed slavishly by Labour Front-Bench Members, including the hon. Members for Kingston upon Hull, East (Mr. Prescott) and for West Bromwich, East (Mr. Snape), who danced to the tune of their county hall puppet masters and read their briefs very well.
I thought that it might be interesting to look back at our debates on the Bill. A little delving into history might provide some interesting facts. We find an extremely rich diet of words for eating. On Second Reading, the hon. Member for Kingston upon Hull, East said:
My hon. Friends and I believe that fares will rise and that services will be cut. That belief comes not only from our judgment, but from well proven and observable principles of public transport economics … it is equally clear that the system that the Secretary of State will influence by the amount of support that he gives … will lead to service cuts and fare increases … It is clear, however that the ratepayers' contribution is likely to increase … The Bill will have the effect of increasing fares and reducing services.
In winding up that debate, the hon. Member for West Bromwich, East said:
The Government's aims are patently contradictory. They cannot have both an improvement in services and a reduction in subsidies."—[Official Report, 13 December 1983; Vol. 50, c. 866–912.]
We then had an extended Committee session in which we thought that they might have wised up a bit, but no, they had not. On Third Reading the hon. Member for Kingston upon Hull, East said:
The Bill is ideological and will undoubtedly produce a transport service that costs more, is inferior and does not meet the needs of London."—[Official Report, 9 April 1984; Vol. 58, c. 99.]
One may divide those criticisms into three. There will be massive fare increases, massive service cuts, and ratepayers will pay more.
Let us examine what happened. Over the four years covered by the fare increases introduced by LRT—they cover from May 1983, which is before it took over—

fares have risen by 23 per cent. During that period, the retail price index rose by 20 per cent. and earnings rose by about 30 per cent. That is hardly a massive fare increase. According to LRT, next year fares will fall in real terms by ·05 per cent. That 3 per cent. rise in real terms compares very interestingly with the 85 per cent. real rise in the 12 years during the time that the GLC ran it. That disposes of the first criticism. [Interruption.] All I am saying is that it has now been allowed to be managed by people who know how to manage, without politicians interferring.
I now move on to the next criticism, that there will be massive—[Interruption.] If Opposition Members are not pleased to know that fares have hardly risen in real terms, I do not know what they want.

Mr. Clive Soley: I am sure that the hon. Gentleman does not wish to mislead the House.

Mr. Tony Banks: Yes, he does.

Mr. Soley: Perhaps he does, but let us give him the opportunity to prove it. If the hon. Gentleman wishes to use statistics, that is fine, but he should use a common base and not a 12-year period. He should take into account the different periods of Labour and Tory administration and the Law Lords' ruling on the price increase, and he can then make a fair comparison. Without doing that, his statistics are nonsense and misleading.

Mr. Maples: The Law Lords' ruling has nothing to do with the matter. Fares went down and went up again. I am not seeking to make a party political point about the GLC. I am seeking to say that LRT is run and allowed to be run by its management and by people who know how to run it, and it is doing a hell of a sight better job than it did when the GLC ran it. That disposes of the first criticism that there have been massive fare rises.
The second criticism was that there will be massive cuts in services. There have not been. The hon. Member for Hammersmith (Mr. Soley) should read LRT's plan In fact, there have been substantial rises in the train miles run by the tube from an index of 94 in 1983 to 104 next year. and on the buses from 93·5 in 1983 to 96·5 next year. The service level has actually risen every year except for one blip on the buses when it went down one year and up to a greater level the next. Next year, the route miles run by the bus services are planned to increase from 16·6 million to — [Interruption.] I shall make my own speech. Opposition Members will have a chance to make theirs. The bus service mileage will rise from 166 million to 169 million, and tube miles will rise from 30·6 million to 31·8 million. That does not sound to me like a massive service cut.
The hon. Member for Fulham (Mr. Raynsford) asked about passengers. The index of bus passenger miles has risen from 97·5 to 107·5 and on the tube from 105 to 147. I should have thought that that was a fairly massive demonstration Londoners' confidence in London Transport.

Mr. Nick Raynsford: In view of the hon. Gentleman's tendency to use rather peculiar bases for statistics, will he please give the House the figures of the trend in passenger usage of London Transport before the fares fair policy introduced by the GLC? Will he tell the House how that fare cut led to a dramatic reversal in a declining trend and the beginning of an upward trend in passenger usage? Will he be fair and give credit where credit is due, to the Labour GLC?

Mr. Maples: When the GLC cut fares massively, usage increased, and when it raised them again, it fell. The criticism of the Bill was that it would result in massive service cuts. Quite obviously and palpably, it has not done so. Services have increased and passenger usage has increased. Tube usage has increased by nearly 50 per cent.

Mr. Dobson: Does the hon. Gentleman travel by

Mr. Maples: I travel by tube quite a bit. I have noticed that a lot more people seem to, as well.
The third criticism was that ratepayers would end up paying massively more. That is interesting because, in fact, the rate precept was 10·8 per cent. in LRT's first year, 9·79 per cent. in the next and 7·7 per cent. in the next. I make that a fall of 28 per cent. I assure Opposition Members that ratepayers in my constituency do not regard that as a massive increase in their rates; they regard it as a substantial fall and welcome it enormously. It is a result of the revenue subsidy given to the GLC falling from more than £200 million to £58 million next year. That is a commendable performance by LRT. After all, the GLC's planned revenue support for next year was £245 million—another £200 million that would have had to be met out of public expenditure.
The prediction of massive fare increases, massive cuts in services and massive increases in contributions from ratepayers has not been justified. Fares this year will fall in real terms, service levels and passenger usage are increasing and the rate precept has fallen 28 per cent. in three years.
All the Opposition's prejudice about the way transport should be run in 1983 and 1984—against anything other than a heavily subsidised, politically manipulated and municipally run service — seems to continue. It is unfortunate for the Opposition that the facts in the LRT plans, some of which I have quoted in my speech, are so confusing to those prejudices. They have to remember that the real proof of the pudding is in the eating. Opposition Members should have the grace to eat their words quietly and amend their prejudices.

Mr. Simon Hughes: Although some of the points made by the hon. Member for Lewisham, West (Mr. Maples) were accurate, the selective use of statistics, and in particular the reliance on the projections rather than the actuality, undermines a substantial amount of the authenticity of what he said. He must not criticise others for selectively using statistics when he then falls into exactly that trap himself.
The last report from the consultative passengers committee—which was set up only, as I remember from Committee, with any proper accountability because of a great deal of pressure—was last March. Then follows, about 10 months behind, the time of the year when we periodically debate the order. The summary of London Regional Transport made by the Committee then holds equally good today. It summarised the performance of LRT as having poor bus reliability and an improved service on the underground. In very general terms, that has been the pattern.
I want to give what are, I hope, some authentic and certainly accurate statistics on the facts, as opposed to the forecasts or plans. On the service levels for bus use, 1985–86 — the last year for which we have complete

figures—had the lowest million bus miles since 1982—162 million, which is 4 million lower than the preceding two years. I accept that underground miles have risen slightly.
For the passenger miles on buses, the last full year shows a reduction to the lowest figure for three years—down to 2,587. The forecast goes up again, but the reality is that it has not happened yet. Again, I concede that underground figures have been greater.
The waiting time—an important statistic for people in London — for the underground has remained consistent throughout the last five years at 3·3 minutes, but the waiting time for buses for four years from 1982 to 1984–85 was 7 minutes, and last year it rose, albeit marginally, by another 0·3 minutes. That is not substantial, but allowing for mergers it means some substantial increases in waiting times. That is not an acceptable statistic.
I have two further relevant statistics. The number of passenger journeys on buses has gone down to a figure lower than the preceding two years, and certainly the number of miles operated as a percentage of the schedule has gone down.
Of course, there have been substantial areas of improvement. For example, if we can obtain a service where the ratepayer and taxpayer pay less and the service is better, that—depending on the fare—is a good deal. The fares have gone up slightly higher than perhaps they might have done, but I accept that London Regional Transport had a particular initial capital investment job to do, and certainly the renovation of the underground stations is very welcome. That is one of the improvements that is entirely acceptable. The number of travellers on the underground again manifests the greater appeal of the underground. But there are other criteria which I would like the Minister to address, and which are equally relevant.
There is, I hope the Minister will accept, a limit to the number of people who can be crowded into the underground. One of the current problems is that at peak times, because of greater passenger use and because we do not yet have the new stock on stream, there are increasing periods of congestion on the underground as well as congestion overground, which highlights another problem. I would like to know whether we shall see a commensurate reduction in the difficulties at congested periods on the underground, which seems to be the greatest problem in passenger use terms that the underground service faces at present.
There are several problems in regard to London buses which I hope that the Minister will honestly address, because they seriously concern Londoners. The first is, of course, as statistics show, that bus services are, at best, improving only marginally so far, since LRT took over, and, at worst, are getting worse. There are substantial areas of London, as I am sure the Minister knows, where the reliability and regularity of the service are not good.
For example, there is a bus that goes almost directly from my home to here, the 53. I use it quite often. When the cab does not work I go on the bus. A couple of weeks ago, I was on the bus every day. Coming along the Old Kent road in the morning, that bus is often crowded and often late, and the timetables are often not there. Some parts of Southwark have timetables for this year already displayed; my part is not likely to get them for another four months, until May. That is not acceptable, not even


knowing when the buses are meant to come, let alone not knowing whether they will come according to the timetable.
The second problem is that there is a tendency, which is welcome, to look at shortening the routes. The logic is that if we shorten the routes the delays should decrease. But that is just the sort of consideration that the hon. Member for Wigan (Mr. Stott) introduced, supported by the hon. Member for Epping Forest (Sir J. Biggs-Davison). Clearly, one of the factors that increases the congestion on the already congested roads of inner London is reducing the number of personnel on the bus from two to one. The obvious result is the delay when people get on; there is also not the support service for passengers—information and so on—on the buses, and that slows the whole system down.
The delays mainly arise — and I have had frequent correspondence about the lack of regularity of buses running to schedule in the Selkent district and elsewhere — because of the congestion on the roads of inner London. We must address that problem and do much more to make sure that we have a higher percentage of services operating according to schedule and on time. We are still failing badly in this, compared with many European cities.
I make the next point on every available occasion and I repeat it today for the Minister. North of the river there is to be the Docklands light railway going into the area east of the City. We do not yet have any commensurate routing south of the river, yet boroughs like mine, Southwark, and on into Lewisham and Greenwich are relatively badly served by public transport. So I ask the Minister to follow up the answer that he gave to me in the first Transport Questions of the year, on 12 January, when I asked him to look at a way of linking up the tube lines going to the Elephant with the east London line as a matter of urgency — and the London Dock lands Development Corporation has been thinking about and working on this — so that we can have much more effective east-west access south of the river to deal with many of the delays. I gather, for example, that Greenwich has just had a station opened but has still only two trains an hour in each direction. That is not satisfactory, because the potential demand is much greater. So I ask the Minister to consider the very poor bus services and the linkage between types of services south of the river, particularly in dockland.
The point that still has not been adequately addressed is how we raise to an equal standard all the public transport services in London and then run them at equal cost to the public. There is an inner London suburban railway system. I hope that the Minister has read the book, "The Clandestine Railway", that has been produced by the passengers' committee. It contains pictures of stations such as South Bermondsey in my constituency which looks as though it had not been attended to by British Rail for a generation at least. Primarily it is a potentially useful service, but first it has to be made to look as though it is there to serve the public, with proper stations and so on, and then it needs to be properly integrated into the underground and bus network.
Then the last step in the Travelcard/Capitalcard system has to happen, which is that a person would pay the same for a card no matter what public transport system was used for the journey in inner London. I hope that the Minister will encourage the House by saying that soon, no

matter whether one goes by bus, by underground or by rail, there will be a common tariff for the Capitalcard or Travelcard with proper interchangeability.
I share the concern that we have so short a time only once a year to debate the only and very anomalous public corporation that runs transport for the capital city. Clearly it is not enough. Although there have been substantial improvements in some areas, I hope that the House will remind London Regional Transport that, particularly for the bus user in inner London, the public transport service is not as good as it could be and that passengers are still paying a relatively high price for a service that often lets them down badly.

Mr. Jeremy Hanley: There is not mch left to say after the powerful speech of my hon. Friend the Member for Lewisham, West (Mr. Maples). He set out the history of the London Regional Transport Act 1984 with a clarity and honesty which we have rarely heard from the Opposition. He served with me on the Standing Committee and we both remember well the arguments from the Opposition. It is a very cynical and unpleasant politician who tries to curry favour by living on the fears of others. I well remember the leaflets being given to people on buses saying that there would be massive tube station closures as a result of the legislation.
One thing that struck me in the contribution from the hon. Member for Wigan (Mr. Stott) and the interjections of other Opposition Members was that they seemed to believe that the London transport system as a whole is meant to be a job creation and a job protection scheme. Hardly ever did any of them mention that it is a passenger scheme. It is there to provide passenger facilities at the levels that passengers require, with a price structure that ratepayers, passengers and Government can afford.
The use of the underground reached an all-time record of 762 million passenger journeys in 1985–86. Is that a 10 per cent. or a 20 per cent. increase? No, since the legislation was introduced, it is a 50 per cent. increase in journeys. And the long-term decline in bus usage has been halted. Overall last year there were 1·9 billion passenger journeys on LRT services.
It is pathetic when Opposition Members start saying, "All right, yes, we agree; the use of tube services has increased, but the bus services have gone down. That is one success and one failure." The answer is that one must give credit for the fact that the tube system is among the most attractive, efficient and well-run systems in the world. At the same time one must recognise the great difficulties that those who run London's buses have, for the simple reason that, because so many people have their own cars—a sign of affluence and of a small increase in prosperity amongst the nation as a whole—that causes difficulties above ground that cannot happen below ground. It must be desperately difficult for John Telford-Beasley to keep the buses from bunching in the traffic levels that we have. Yes, it is irresponsible of millions of people to bring their domestic cars into London. It is also unnecessary and wasteful. The bus services would improve dramatically if domestic cares and smaller lorries would keep out of inner London.
That will be achieved by making the bus services even more attractive and by imaginative schemes to make sure that parking is introduced outside London towards the M25. Individuals must be educated out of the socially


unacceptable habit of coming alone into London in motor vehicles. Success will depend on matching the efficiency of the service, and the attractiveness of the facilities provided above ground with those below.

Mr. Raynsford: Many Labour Members accept much of what the hon. Gentleman says about the strategic importance of seeking a reduction in private vehicle usage in central London in order to facilitate bus movement. But he went on to say that one of the keys to that was making buses more attractive. Does the hon. Gentleman agree that one-person operated buses and an increase in the time taken to pick up passengers, so reducing the efficiency of buses, would have exactly the opposite effect?

Mr. Hanley: Mr. Telford-Beasley has exactly the right plans to make buses more attractive. He has already achieved that on some routes in the centre of London. He has introduced midibuses to make sure that people sit in comfort and not in long, draughty buses, often empty during the middle of the day, apart from the odd one or two passangers.
Bus mileages have reduced over the years on some routes because the level of passengers per bus has been reduced. Therefore, one must expect to reschedule the buses to make sure that they are more efficient. The midibus system and competitive tendering will bring more attractive routes that are more responsive to individual's needs.

Mr. Raynsford: I was asking about one-person operated buses.

Mr. Hanley: The hon. Gentleman seems to believe that a bus is inherently more attractive if two people are working on it rather than one. What is important is that the system is efficient, cheap and works. Merely having two people on a bus does not achieve that. I readily admit that one of London Buses biggest problems is in one-person operation. There is a resistance to that among the public. There are routes where it will be discovered that passenger resistance is such that buses will have to go back to having extra staff. I do not deny that. But the professional management of London's buses is exactly what is needed to decide on the future of the bus network. That will not be decided on the narrow political point of having as many working on the system as possible. It will be decided upon giving the best service to the passenger and that is what Mr. Telford-Beasley is capable of.
I also want to congratulate Dr. Tony Ridley. His professionalism on the underground has been superb. Let us remember that the highest level of passenger usage on the underground was last summer when the fewest holidaymakers ever came to Britain, and especially to the capital. That is indeed a tribute to Dr. Ridley and his staff. Any hon. Member who looks at London's underground system can see how attractive, informative and clean it is. Not only that but the new station designs are appropriate to the areas they serve and enhance the original architecture, as at Baker street on the old metropolitan line.

Mr. Dobson: How many of the station improvements that the hon. Gentleman is talking about were planned or commenced under the Labour-controlled GLC and how many have been carried out since LRT took over that had not been started or planned by the GLC?

Mr. Hanley: The same GLC forecast the closure of 35 stations—[HON. MEMBERS: "Answer."] It was starting to do improvements in certain stations, but it is now an attractive scheme for the whole of London which spreads out into the provinces.

Mr. Dobson: rose—

Mr. Hanley: No. The hon. Gentleman can make his own speech in due course.
Ticketing has been made more attractive. It has been a hard battle to persuade LRT that passengers should be able to buy a ticket where it is most convenient for the passenger. The increase in the number of ticketing outlets is bound to increase business. It is now easier to get on an underground train, and fraud has been heavily reduced.
I should like to remind the House of the intentions behind the London Regional Transport Bill. LRT was to restore a stable framework for public transport planning. That has been achieved. It was to reduce unnecessary costs and provide better value for money for travellers, ratepayers and taxpayers. That has been achieved. It was to bring bus and underground services into the same policy framework as the BR commuter services, and to improve co-operation. Through-routing has never been easier.
Plans that London Regional Transport and BR unveiled recently are exciting and what should have been introduced years ago. They have been achieved under this structure. LRT was to redirect resources to cost-saving investment. That is exactly what has happened. The capital investment programme has increased and the need for revenue support cut while fares have been held steady. It was to ensure fully professional management. Under Sir Keith Bright, who has not been mentioned, but to whom great tribute should be paid—

Mr. Tony Banks: Who appointed him?

Mr. Hanley: —we now have a system which is improving, not declining, is popular and serving the capital rather than union and Labour pressure.

Mr. Alfred Dubs: It is a matter of regret that there are so few opportunities to debate public transport in London. I get a steady stream of complaints from my constituents about the bus services in Battersea. I am surprised that the hon. Members for Lewisham, West (Mr. Maples) and for Richmond and Barnes (Mr. Hanley) seem to think that loyalty to their Minister is more important than loyalty to their constituents. The world that they describe is not that which is known in most parts of London.
During the past few years we have experienced a steady deterioration in bus services in London. This naturally attracts more cars. There is therefore more pressure for trunk roads. Therefore there will be more traffic, and therefore the environment will get worse. The evidence of the time under the Labour-controlled GLC was that public transport can win more passengers if services are reliable and fares are reasonable. That is the lesson of the past and the lesson of other cities such as Paris.
I shall concentrate on bus services in south London. Whatever are the planned services, the fact is that there are approximately 30 per cent. deficiencies on at least some of the routes in London due to staff shortages and shortages of spare parts for older buses. London Buses is some 800


drivers short, and in the Wandle district, which covers part of my constituency, there is a shortage of 160 drivers. In south-east Kent there is a shortage of 120 drivers.

Mr. Hanley: Will the hon. Gentleman ask bus conductors to take a promotion and apply for those jobs?

Mr. Dubs: I think that that is a somewhat irrelevant point.
I receive many letters of complaint and I should like to quote briefly from one of them. The letter complains about services on the 44, 137 and 170 routes. My constituent complains that for a week recently, and not during the heavy snow, she had to wait at least half an hour every day to get a bus from Battersea to Vauxhall or Whitehall. She concluded her letter by writing:
I wonder if there is anything further you can do to put pressure on LRT to improve the bus services in North Battersea. People are utterly fed up with excuses. We want an improvement, not excuses.
It seems that that attitude and those words typify the views of so many Londoners about bus services.
If all is as well on London buses as Conservative Members suggest, why is it that London Buses is estimating that revenue in the current year will fall by 8 per cent.? That is a sign of a service that is failing, not succeeding.
I have received bitter complaints from constituents about one-person-operated buses. The operation may be all right in far suburban areas or in the country, but in inner London it leads to congestion at every bus stop, to enormous difficulties for the disabled, who complain that if there is not a conductor on the platform they get no help to climb on the bus with the result that they cannot manage to use buses, and to similar difficulties for those with shopping or with young children.
One-person operation has been opposed by the London Regional Transport passengers' committee and criticised by the police. It is surely not the way to run an efficient and sensible bus service in inner London, yet we hear that because of less revenue support there are to be more one-person-operated buses and that London Buses will need an extra 440 new buses for this purpose. It seems that it has the money for only 65 new buses, based on £23 million of investment, and that it will have to buy 220 second-hand buses instead. Some of the 220 will be buses which it has previously owned and sold. This is ludicrous. London Transport will not have sufficient buses with which to tender for the 33 routes that will be put out to tender this year. The Minister knows that, so I am interested to know how he can say that London Buses will have to compete for routes when he is preventing it from having the resources with which to compete with private operators.
There is a list of the services that will be affected. We know that one-person operation will affect a number of routes in south London, such as the No. 1 from Marylebone to Greenwich. It will be converted to one-person operation in May. In September the 53 route from Oxford circus to Plumstead will be affected in that way. The southern section of the 88 route from Acton Green to Mitcham will also become a one-person operation. There is a long list of routes that will be affected by tendering, including many that may be lost entirely to public transport. These are services that will affect Plumstead, Norbiton, Harrow, Merton and Sutton. The tendering process may result in these areas losing public transport services. There is a list also of possible job losses.
I agree that London Transport's primary aim is to provide a decent service, not to provide jobs, but my submission is that London Buses is failing the people of London. This is clear if we listen to the complaints of our constituents and ascertain for ourselves how long it takes for buses to appear. If services are running to schedule all may be well, but time and again schedules are not maintained because of lack of resources, inadequate buses and poor repair facilities.
We know, for example, that London Transport has had to close its driver-training school at Chiswick. We know also that many of the training resources in the districts are inadequate. It seems that the bus services will continue to offer poor and deteriorating service for the people of London. It is time to say that we do not have to run our capital's bus service in that way. It is time to say that there is another way of doing it. Provided that the resources are made available, we can have decent transport for London. Transport is the lifeblood of the capital, and given the way in which bus services are deteriorating year by year, that lifeblood will cease to flow. It is up to the Government to say that they will provide the resources in future, instead of always saying, "Never mind the bus passengers, let them wait. They do not matter."

Mr. Michael Fallon: It would be quite wrong if consideration of this order was simply restricted to hon. Members with London constituencies. A large part of the estimated grant in paragraph 4 of the order must be provided, not by the ratepayers of London or by London Regional Transport's customers but by taxpayers throughout the rest of the country.
We should note—whether we represent London or elsewhere—that this year the total grant of £285 million provided to LRT exceeds the entire regional aid budget for the rest of the counry. It is only right that somebody from outside London should be asking some slightly harder questions than we have yet heard from either side of the House tonight about the performance of LRT.
Why is it that the most prosperous part of the country has the most heavily subsidised commuter network in the country? Why should taxpayers in the north fund those southern comforts?

Mr. Dobson: Will the hon. Gentleman give way?

Mr. Fallon: No. Why should taxpayers in Glasgow and Darlington subsidise the City slickers from Fulham broadway or Sloane square as they travel to work? Why does LRT make a loss? There has been a great deal of stale thinking on the issue of LRT—that has been displayed in previous debates on the Bill and during tonight's debate.

Mr. Dobson: rose—

Mr. Fallon: No, I will not give way.
LRT has a virtual monopoly of the bus network and a complete monopoly of the underground network. Why does not LRT contribute — through profits — to the national wealth? Why does LRT not help to fund our schools and hospitals in the rest of the country instead of drawing resources from them?
We have an agenda for privatisation. Why is LRT not on that list?

Mr. Hanley: Is the metro in Newcastle making a profit?

Mr. Fallon: I apply the same argument to the metro, but I can assure my hon. Friend that the metro does not rely on as heavy a subsidy from public funds as LRT—that is the point. LRT is the most heavily subsidised network.

Mr. Dobson: Will the hon. Gentleman give way?

Mr. Fallon: I will give way, but I am anxious to let other hon. Members participate in the debate.

Mr. Dobson: As the hon. Gentleman is drawing attention to anomalies, does he think that it is ever so slightly anomalous that Britain's biggest education authority receives not one jot of subsidy from the taxpayer, as every penny comes from London's ratepayers unlike the hon. Gentleman's area?

Mr. Fallon: That question is entirely beyond the scope of the order.
Why is the privatisation of LRT not one of the Government's priorities? How can the Government justify taxpayers in the rest of country having to subsidise a merchant banker's journey from Fulham Broadway into the heart of the City when that same merchant banker is working on the privatisation of transit systems in the far east? It is ironic.
I have two specific questions for my hon. Friend. First, when will the estimated grant under paragraph 4(1) be zero rather than a figure reduced from £235 million in subsequent years? At what point will there be no estimated grant? At what point will taxpayers in the rest of Britain be free of the burden of subsidising southern comforts?
Secondly, when will my hon. Friend come forward not simply with guidelines that tell LRT how to manage its system better but with a positive plan of privatisation? That would free LRT of the politicking that we have seen tonight in the House. Privatisation would allow LRT to flourish as a fully commercial company and would allow those who work in it to share in the fruits of its enterprise rather than to rely on the generosity of the taxpayers in the north.

Mr. Harry Cohen: The Conservative Government have reduced public transport in London to a state of crisis. They took democratic control away with the abolition of the GLC, but since then they have made ratepayers pay a higher bill for a reduced service. The Government subsidy has more than halved and, as a result, fares have shot up. Services have been cut and jobs lost. That is due to get worse, as privatisation and deregulation increasingly hit London. Private operators will squabble over the profitable routes, leaving residents everywhere else to suffer. Frequent service changes, poor information, unreliable timetabling and short cuts on safety will bring chaos and dissatisfaction. The Government are responsible for this decline, and have no remedy but to make it worse.
I wrote to Sir Keith Bright, the chairman of LRT only this week, and I shall quote part of the letter:
Travelling regularly on the underground, including to the House of Commons from my home in Leytonstone, I am aware that there are frequently delays in service caused by signal failures, trains out of commission, staff shortages and other managerial problems, adversely affecting the service. I am also aware of the dingy state of many of the stations. I know that the GLC had plans and was undertaking a programme to invest in both rolling stock and station refurbishment, but that these plans have regrettably now mostly been delayed or abandoned.

I call on him to be ready with a plan that will meet the joint aims of improving public transport in London and creating jobs, which will be necessary with the next Labour Government.
I am going to raise this matter when the next general election is held. Public transport will be part of my campaign in the leaflet that I shall be producing, and I shall be demanding the reversal of this decline, and calling for a Labour Government to provide much-needed investment to modernise the road, rail, tube and bus network in London; to provide adequate finance for the services that people need at fares that they can afford; to restore democratic accountability so that local communities can have a say in their public transport; to undertake action on traffic management, with schemes such as bus lanes and selective road building to reduce traffic congestion; to guarantee the free travel passes for pensioners—when the Tories look for cuts, these could still be at risk — and to improve travel facilities and access to the buses and stations for disabled people.
That programme, started by the GLC, has been cut to nothing. Staffing levels should be increased to assist and protect travellers. There must be a proper maintenance programme to improve safety and reduce the dangers of crumbling roads. That is the programe for effective public transport in London. It is a much better programme for people to get around on public transport than the market mayhem and Conservative chaos that is being inflicted on the people of London.

Mr. Clive Soley: It is a bit much for the Minister to open the debate by saying that the GLC was politically motivated, with the implication that he was not. He is a politician, and the Secretary of State and the Minister are imposing political conditions on LRT. I make no complaint about that right, because they won an election just as the GLC won its election, and so had rights over London transport—until it was abolished in case the Labour party won another election, as it was bound to do.
Many Conservative Members show an appalling ignorance. All the station improvements, the fares card to cut fraud, the "Fares Fair" scheme and other improvements all came from the GLC, not the Government, and the Government are picking up some of them because it has turned out that they work. It was the GLC that appointed Dr. Bright, so the Minister's comments are even more out of tune with reality.
What the Minister said about dial-a-ride is grossly misleading. I wrote to the Minister and I have sent his reply to the dial-a-ride people. I can tell the Minister that not just my supporters but people across the political spectrum were angry with his reply, because it raised expectations. The tiny increases have allowed dial-a-ride to advertise its services more widely and provide new capital equipment in the form of buses. However, there is no provision for the increased use that will follow. All the Minister will do is upset many disabled people who will try to use dial-a-ride and find that the facilities are not available. I challenge the Minister: if he does not believe me, he should ask the dial-a-ride organisers because all of them, across the political spectrum, told me that, and I am prepared to give him further details.
The 207 bus route starts in my constituency and thereafter passes through several constituencies held by Conservative Members such as Ealing, Acton and so on.

Mr. Tony Banks: Shame. We should re-route it.

Mr. Soley: All the Conservative Members from Acton to Uxbridge have come out in opposition and have given the Shepherds Bush and Hammersmith Gazette, the local paper that has taken up the issue, their commitment to oppose one-person operation. They have done that because they know that it is unpopular. It is unpopular because, as has already been pointed out, one-person operation, on average, increases journey time by between 15 and 20 per cent. On a route such as the 207, the journey time will be increased by much more. There have been complaints about that service for a long time.
The one area in which I was wrong in the past about one-person operation is that there is some evidence that crime and accident rates have gone down. However, it is wrong to associate that just with one-person operation. It is due to the automatic closing doors which stop people from falling off and so on. The lessening of attacks is probably due not only to the low fares in certain high-risk areas late at night, but to the shields that have been put up and radio links and so on. To say that it is because of one-person operation, as is implied in some of the recent publications, is grossly misleading and another example of the misuse of statistics of which Conservative Members have given such an appalling example this evening.
My main reason for intervening, as the Minister will know, is the development of the Hammersmith Broadway site. I realise that the Minister cannot reply at this time, because there is an appeal before the Secretary of State. However, my hon. Friend the Member for Fulham (Mr. Raynsford), the Members of the European Assembly, councillors and supporters of the Conservative party as well as myself, believe that the scheme for Hammersmith centre will be totally unacceptable in the form that has been proposed by LRT. That scheme is one of the biggest proposals of its type in the country — some say in western Europe, but I do not have all the figures. LRT has proposed that form because political pressure has been put on it by the Government to make money.
The interchange affects all hon. Members. Anybody returning from Heathrow comes through there and changes to the Piccadilly line. Many people use it to get to the Metropolitan line. It is a crucial interchange for buses, tubes and other traffic. By telling LRT that it must stay within certain cost limits and by not allowing it to fund the docks railway without finding its own revenue, the Government have put pressure on LRT to make sites such as Hammersmith pay. Therefore, there has to be a mighty office development on top. In Hammersmith centre there will be an enormous office development which will dramatically change the nature of the area. It was a major issue at the local elections and it will be a major issue again because it is ripping apart the town centre at a time when we are trying to rebuild the town centres of Britain because we know that by having them turned into derelict areas and office space areas we have created the problems of inner cities and made them worse in recent years. I ask the Minister to take away the message that if the Government allowed Dr. Bright and the LRT more flexibility on the money issue they would not have to build developments which alienate hundreds of thousands of

people across the country. Even people who do not live in Hammersmith have been complaining about the nature and scale of that development. It is huge.
Dr. Bright has undertaken, following a meeting with some of us, to go away and look at that scheme again, but his room for manoeuvre is limited unless the Government alter their political instructions.
I understand that the Minister cannot reply to me on that tonight, but I ask him to take away the great seriousness with which people across the political spectrum view that issue. It is extremely important and will have a dramatic effect on the whole of west London. Priority must be given to passenger users and to people who live in the area, not to office development.

Mr. David Mitchell: It may be convenient if I respond to a number of points that have been made. The hon. Member for Wigan (Mr. Stott) opened in his usual style. He referred to some of the unfortunate side effects of improving efficiency which often means, in any business, that one operates with less manpower than one had before. A number of hon. Members on both sides of the House referred to the fact that it is not part of the work of LRT to provide an employment agency. It is its task to provide the best possible services for the citizens of London and others who use its services. The hon. Member for Holborn and St. Pancras (Mr. Dobson) interrupted the speech of the hon. Member for Wigan by saying that there were 393,000 unemployed in London and 36,000 registered vacancies. The hon. Member for Wigan must bear in mind that the registered vacancies are a third of the total vacancies—that is 100,000 vacancies—and that must be taken into account.
The hon. Member for Battersea (Mr. Dubs) told the House that LRT had a shortage of staff. If LRT has a shortage of staff, that is self-evidently an answer to the question about what happens to some of the people who lose their jobs as a result of improved efficiency.
The hon. Member for Wigan has said before that he deplores the decrease in subsidy. He appears to regard subsidy as some sort of virility symbol. I do not do that and I do not think those who pick up the bill, the ratepayers and taxpayers, regard it in that light either. The hon. Members for Wigan and for Battersea claimed that London Buses will not have enough vehicles to run all the routes which are being put out to tender. However, we know from experience that London Buses has won 41 per cent. of the tenders for which it has entered. It would be nonsense for it to put aside the 100 per cent. of vehicles required for the tenders that are coming up and then to find that it won the same proportion, or roughly the same proportion of tenders that it won before and had a whole lot of surplus vehicles on its hands. The hon. Members who pressed that point cannot have thought clearly about the matter.
I turn to OPO services because it is an operational matter for LRT. They clearly bring major cost savings, there are fewer accidents to passengers, fewer assaults on crew and service reliability is greatly enhanced by dependence on one rather than two persons to operate the service. LRT is not committed to 100 per cent. OPO operation, although that is the norm in most major cities throughout the world. London Buses appraises each stage of OPO conversion on its merits taking account of cost


savings, time losses to passengers, and congestion effects. It is also looking especially at ways of achieving faster boarding times and reducing delay.
The hon. Member for Wigan threatened that if the Labour party was ever to win a general election, it would re-introduce political control over LRT operations. All I can say is that I am sure that that threat will be noted in the right quarters, and plenty of people will want to see that it does not happen.
My hon. Friend the Member for Lewisham, West (Mr. Maples), in a hard-hitting speech, demolished much of the case against LRT, particularly the Labour party's prophecies that if the Greater London council ceased to run LRT, it would deteriorate. All that has been proved to be arrant nonsense.
The hon. Member for Southwark and Bermondsey (Mr. Hughes) raised several points. He said that there was the lowest-ever figure for London Buses mileage. With great respect to the hon. Gentleman, he implied by that that fewer bus miles were being run in London. He is confusing himself with figures. While it is true that London Buses is running fewer miles, that is because the company has failed to win some of the contracts that have gone out to competitive tender. If he looks at the overall mileage in London, he will see that the deterioration that has gone on over many years has come to a stop. The crucial difference in the figures is that the 163 million miles to which he referred is the mileage by London Buses whereas the total mileage being operated in London is 169 million miles. I think that that will give the hon. Gentleman some reassurance.
The hon. Gentleman also referred to congestion on the tube. London Transport is well aware of that. We have helped by approving £45 million worth of additional rolling stock for London Transport. On top of that, as an emergency measure, some older stock is being brought into operation. The fact that there is such an increase in demand is a sign of success. It is perhaps one of the penalties of success, but the last thing that one should do is in any way to fail to recognise that it is success that has led to the problem.
My hon. Friend the Member for Richmond and Barnes (Mr. Hanley) paid tribute to Sir Keith Bright—rightly so. I add to that a tribute to the role played by Dr. Tony Ridley and John Telford-Beasley. Those professional managers have achieved a great deal, and are responsible for the success that has done so much to improve the services in the capital.
The hon. Member for Battersea also referred to a reduction in the revenue of London Buses. That is because it failed to win the tenders. The same point was raised earlier. The hon. Gentleman is misleading himself if he thinks that there is any other reason for that.
My hon. Friend the Member for Darlington (Mr. Fallon) asked me certain questions. He was concerned about when the subsidy to LRT would come to an end and why we had to subsidise it. That is because—

It being one and half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 14 (Exempted business).

Question agreed to.

Resolved,

That the draft London Regional Transport (Levy) Order 1987, which was laid before this House on 17th December, be approved.

Mr. Tony Banks: On a point of order, Mr. Deputy Speaker. May I place on record how thoroughly unsatisfactory it is to have a one-and-a-half hour debate on something as important as London Regional Transport at this time of night when many hon. Members have been unable to speak?

STATUTORY INSTRUMENTS, &c.

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &amp;c.).

NORTHERN IRELAND

That the draft Local Elections (Northern Ireland) (Amendment) Order 1987, which was laid before this House on 13th January, be approved. —[Mr. Durant.]

Question agreed to.

WELSH GRAND COMMITTEE

Ordered,

That, during the proceedings on the matter of the Public Expenditure White Paper (Cm. 56–11), as it relates to Wales, the Welsh Grand Committee have leave to sit twice on the first day on which it shall meet; and that, notwithstanding the provisions of Standing Order No. 88 (Meetings of standing committees), the second such sitting shall not commence before Four o'clock nor continue after the Committee has considered the matter for two hours at the sitting.—[Mr. Durant.]

PROCEDURE

Ordered,

That the Standing Order of 20th March 1984 relating to the nomination of the Select Committee on Procedure be amended, by leaving out Mr. Christopher Chope, Viscount Cranborne and Mr. Hugh McCartney and inserting Mr. D. N. Campbell-Savours, Sir Carol Mather and Mr. William Powell.—[Mr. Durant.]

PARLIAMENTARY COMMISSIONER FOR ADMINISTRATION

Ordered,

That Mr. David Clelland be discharged from the Select Committee on the Parliamentary Commissioner for Administration and Mr. George Howarth be added to the Committee.—[Mr. Durant.]

Caterpillar Tractors (Closure)

Motion made, and Question proposed, That this House do now adjourn—[Mr. Durant.]

Mr. Michael Hirst: Any factory closure is usually a matter of great sadness, for the management, the work force, suppliers and the local community. When news of a closure is preceded by an announcement of a substantial new investment programme, which is started and then abruptly cancelled, that must surely be a matter of more than sadness. It is a matter of outrage involving justifiable accusations of rank bad faith. That is, in essence, the experience of the Caterpillar factory at Tannochside, Uddingston. A number of my constituents and constituents of other hon. Members derive their living directly or indirectly from that factory.
Caterpillar at Uddingston is typical of many of the United States-owned factories in central Scotland which have set up during my lifetime. By and large, these United States firms have been excellent employers and responsible corporate citizens. I am pleased that the hon. Member for Motherwell, North (Mr. Hamilton) is present, because I am sure that he can testify to my points as he has for many years represented the constituency which incorporates the factory. Caterpillar has known good times as well as difficult times. Over the past 30 years it has been a profitable and worthwhile operation. The management and work force have co-operated to respond positively to the many challenges that the automotive industry has faced through competition from the Japanese, through technological advance and through world economic and market conditions.
Given the concern about the number of factory closures in west central Scotland recently, it is hardly surprising that there was universal acclaim when, just a few weeks ago, senior executives of Caterpillar announced a major investment programme at Tannochside. The factory was to be designated a PWAF, a Caterpillar acronym meaning "a plant with a future". Some £62 million was to be spent re-equipping the plant with the most sophisticated robotic machinery in order to create a factory capable of achieving the significant production cost reductions necessary to be internationally competitive. A further £8 million was to be spent redesigning the factory layout and training the employees in the new technologies.
That investment programme was supported by a promise of substantial Government assistance. All that good news was announced during a visit to the factory by my right hon. and learned Friend the Secretary of State for Scotland. Indeed, the Caterpillar press release rightly identified the need for an ultra modern factory. The plant director was able to say on the occasion of the Secretary of State's visit:
Fortunately because of the new products that we are adding to this facility namely fabrications and transmissions, our manpower requirements in 1989 are forecasted to be approximately the same number—1,200 —of people as we presently employ. The £62 million investment can be looked upon as insurance against the loss of 1,200 jobs. There is no alternative to investment and training.
I dare say that many people on the occasion of the Secretary of State's visit would have said "Hear, hear" to that. I am glad to say further that the plant director acknowledged in pretty generous terms the support that

the Minister's Department was giving to that investment as well as the fact that the company intended to apply for assistance under the advanced manufacturing technology scheme administered by the Department of Trade and Industry.
Caterpillar thus symbolised the new hopes for Scottish manufacturing business, where employee skills and commitment, allied to the latest technology and flexibility in work practices, could manufacture a world-heating product.
All was presumably well with this new investment programme, because in the early part of this month a very expensive robotic machine was installed and started test production exactly two weeks ago, just hours before an announcement from Caterpillar's headquarters in Peoria, Illinois that not only was the whole investment programme to be abandoned, but that the whole plant at Uddingston was to close. PWAF— a plant with a future: how sick these words must sound in the ears of the work force. Understandably, the announcement has caused dismay and outrage among the work force, the suppliers, the local community and in Government circles in Parliament.
Caterpillar has signally failed to provide a persuasive explanation for its decision, so soon after starting a major investment programme, to abandon it and close the factory. What has happened in the short time since that announcement to invalidate the corporate strategy that supported the new investment? Caterpillar's senior executives should have been aware of future market trends and production requirements when they made their announcement in September. Every hon. Member must know that investment decisions are made on a medium to long-term basis and are generally unaffected by short-term market hiccups — if that is what prompted the Caterpillar United States decision.
Why have the executives of Caterpillar in the United States been so unforthcoming about their reasons for closure? Can my hon. Friend the Minister, who met them last week, shed some light on the reasons for their abrupt decision? Caterpillar cannot slide out of its obligations as a major employer. It must explain its conduct, especially in view of the high-flown declaration of business ethics in Caterpillar's "Code of Worldwide Conduct and Operating Principles", from which I rather ruefully quote. It states:
We intend to hold to a single high standard of integrity everywhere. We will keep our word. We won't promise more than we can reasonably expect to deliver; nor will we make commitments we don't intend to keep. The goal of corporate communication is the truth—well and persuasively told.
In the light of that and the earlier admissions by the company, I am prompted to think that, at best, the senior managers at Caterpillar have been guilty of gross incompetence in the planning of their corporate strategic objectives. At worst, their conduct borders on corporate treachery.
I accept that those are strong words of accusation, but do not the circumstances of this unique case suggest that Caterpillar has deceived a loyal and co-operative work force, that it has dealt shabbily with its suppliers and sub-contractors, many of whom have recently become recognised sub-contractors and, to do that, turned away business that might otherwise have been available to them, and that, more than anything else, it has betrayed a local community that is struggling to cope with unemployment at 20 per cent.? I do not generally support the occupation


of a factory by its work force, but I can readily appreciate the sense of betrayal that prompted the Uddingston work force to take the dramatic action that it has.
I have some questions for my hon. Friend the Minister, and I hope that he can give me some answers. Where do matters stand with Caterpillar's senior management? When does he or my right hon. and learned Friend the Secretary of State expect a reaction from Peoria—a reaction which I understand was promised when the president of the company met him last week? Can my hon. Friend say whether the Government have made any contribution to the investment support which they promised? What contingent plans will be made to try to protect employment at Uddingston if Caterpillar pulls out? Is my hon. Friend aware of another manufacturing operation that could secure a future for the huge Tannochside factory? Will he confirm that the United Kingdom does badly out of the decision, and that Leicester will not benefit materially from the closure of Uddingston?
We all recognise that business conditions change, sometimes rapidly, and that no factory has a God-given right to remain in production for ever. Caterpillar's decision might have been easier to understand, if not to accept, had it warned in September of overproduction or market problems rather than made that bullish announcement of investment plans. The whole House will wish to join me in condemning the actions of the senior management of Caterpillar in the United States and in supporting the valiant efforts of my right hon. and learned Friend the Secretary of State and my hon. Friend the Under-Secretary of State to persuade the Caterpillar management to reconsider its decision to close the factory.

Mr. James Hamilton: It is most unusual for an hon. Member to have an Adjournment debate on a factory in another hon. Member's constituency, but on this occasion I welcome it because it means, in essence, that the Government very much condemn the action taken by the Caterpillar management. I have been associated with Caterpillar since 1956. As a member of a local authority, I greatly assisted it. We gave it every possible assistance. We demolished houses to give it a green field site. We built new houses for people whose houses were demolished, and we built houses for incoming workers. At the outset of our negotiations with the company, we found that, true American company that it was, we had great industrial relations trouble. However, we managed to right that problem, and since 1956 industrial relations have been of the best order and the product has been excellent. They are not my words but those of management.
My first intimation about the closure was when the shop steward, who happens to be a friend and constituent of my hon. Friend the Member for Hamilton (Mr. Robertson), phoned me at my home to tell me that, in Illinois, consideration was being given to closing two or three of the factories within the Caterpillar combine, and that our factory was one of those under consideration. To say that I was shattered is to put it mildly. I was absolutely flabbergasted; indeed, I thought that the shop steward was going stark raving bonkers.
When the Queen made her speech opening Parliament, I met one of the top management of Caterpillar in London, at his request. He told me how fortunate I was because our factory was doing well. He mentioned the £62·5 million investment. It is not just true to say that the right hon. Gentleman the Secretary of State for Scotland visited the factory, but it was set up that he should go and assist the general plant manager to make the announcement himself. He made that announcement. Indeed, in his new year message, in glowing terms he also praised the investment that had been made by the Caterpillar tractor company.
All this was done in September last year. A few short weeks afterwards — in fact, to be precise, on 16 December—the shop steward sent for the work force, and told them that the factory was to close. This closure was to be done without any consultation with the unions, the shop stewards and, indeed, me. Bearing in mind that, before the advent of the Advisory Conciliation and Arbitration Service, I performed many miracles in the factory by acting as a mediator to keep good industrial relations, these are the thanks that we got from the company.
The Secretary of State for Scotland, it is true, met the Illinois top management. The trade unions met the Illinois management, and I met them before they boarded their plane to go back to America. We put the case to them and pointed out that it was not only a case of 1,221 men becoming unemployed, but of smaller companies that were dependent on Caterpillar also going to the wall. On that basis, many of the workers had given loyal service to the company for 25 years—some of them for nearly 30 years. They were being thrown on the scrap heap with no possible chance of getting employment anywhere because there is 22·1 per cent. unemployment in Lanarkshire.
That is the thanks that we get from an American company. To say that it is scurrilous is to put it mildly. The Minister was present at the Caterpillar negotiations—if one can call them negotiations—when we tried to get the company to keep the factory open. What is the up-to-date situation with the negotiations? What inducements were given or offered by the Government to keep Caterpillar at Tannochside? What is the situation with the Belgian factory? My information is that the work from Tannochside will go to Belgium. What is the Belgian Government giving that we cannot give? What do multinational companies have that we do not? All these questions must be answered.
I am pleased that the hon. Member for Strathkelvin and Bearsden (Mr. Hirst) stated that he fully supports the union members' sit-in at the factory. It goes without saying that Labour Members support them 100 per cent. Indeed, some Labour Members have visited the factory on two occasions, and I intend to do so again on Friday morning. I want these men to know that we recognise that they are fighting for their very existence. If they do not fight now, and fight all the way, their jobs will be lost for ever.
I also want a catergorical assurance from the Minister and the Secretary of State—indeed, from the Cabinet as a whole—that they are prepared to support us 100 per cent. in our fight to ensure that that factory is re-opened and its workers returned to full employment.

Sir Hector Monro: During a week when we have had some particularly good news about new jobs, it


is sad that we have tonight a united House condemning the disastrous decision of Caterpillar to close its works. Our sympathy — and, I hope, a great deal more—goes to those who will lose their jobs.
I want to show that the repercussions go much further a field than Lanarkshire. In my constituency of Dumfries, Penran Engineering has provided the cabs for Caterpillar —worth £1·6 million last year, which is 41 per cent. of its sales. Fifty jobs will be lost if Caterpillar does close its factory. Penran was, of course, encouraged by Caterpillar to invest £150,000 last year in robot machinery, and because of the confidence shown by Caterpillar in the very large investment that it promised to make, Penran had gone ahead with other preparations to step up production.
Hopes have been sadly dashed, and tonight I want to support my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) and the hon. Member for Motherwell, North (Mr. Hamilton) and urge my right hon. and learned Friend the Secretary of State to keep up the pressure being exerted on the directors of Caterpillar. I am sure that he is supported by my hon. Friend the Minister, who is responsible for industry. We all feel that every endeavour must be made to persuade the directors of Caterpillar to change their minds and retain what is a thoroughly efficient and effective factory that provides jobs not only in Lanarkshire but, indirectly, further a field.

The Parliamentary Under-Secretary of State for Scotland (Mr. Ian Lang): I welcome the opportunity given to me by my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) to explain the circumstances surrounding Caterpillar's declared intention to close its Uddingston plant. This decision has aroused feelings of shock and anger and has led to accusations of deceit, and even betrayal, from within all political parties—not only at the decision to close, but at the manner in which it was taken and announced. Many of those sentiments are widely shared by the public at large, and the Government, through the statements of my right hon. and learned Friend the Secretary of State for Scotland, have made their concern known.
I especially welcome the speech of the hon. Member for Motherwell, North (Mr. Hamilton) and the unity of purpose displayed in his remarks. I pay tribute to him for his work over the years with Caterpillar, which is in his constituency. I am sure that the House will readily understand his strong personal feelings about what has happened and his concern for his constituents in these circumstances. He and my hon. Friend asked a number of questions, and I shall try to answer as many as I can in the time available.
In December 1985, Caterpillar of the United States of America announced a five-year 600 million dollar modernisation programme to automate its manufacturing facilities worldwide. In the light of group investment intentions, Caterpillar management at Uddingston put together a five-year investment plan which my officials were advised had received group approval in principle, subject to the availability of an acceptable level of financial support through regional assistance. The intention to invest was widely publicised at that time throughout the Uddingston plant, which had been designated by the company as a PWAF — the corporate acronym for a "plant with a future".
Caterpillar UK Ltd. is a wholly owned subsidiary of the US Caterpillar Inc. The United Kingdom company, with plants at Uddingston and Leicester, employs over 1,900 in the manufacture of tracked vehicles, lift trucks and backhoe loaders, plus spares and components for use in products assembled at other group facilities. The Uddingston factory was established some 30 years ago and now produces the D6 range of earth-moving tractors for sale in Europe, Africa and the middle east; this is regarded as the plant's prime product, although the same range is produced at Caterpillar plants in France, Japan and the United States of America.
The manufacture of replacement parts and components for other product types now accounts for a substantial part of the plant's output in which Uddingston is effectively operating as a sub-contract supplier to the group. The vast majority of its production goes to export markets, via other group plants and subsidiaries. Having at one point employed some 2,500, the 1 million sq ft plant now has a work force of less than 1,200. Until 1979, the Uddingston plant produced three models of earth-moving equipment, but is now reduced to one main product type, the D6 tractor. In 1983, application was made for regional selective assistance in order to secure continuing manufacture of the D6 range, and a substantial offer of selective grant was subsequently offered to, and accepted by, the company. This offer of assistance was in addition to the company's entitlement to regional development grant, payment of which has proceeded in the normal way.
In July 1986 the company received a further offer of substantial regional selective assistance grant towards a major capital investment programme to modernise the Uddingston facility, with the intention of improving its efficiency, driving down production costs, and broadening its product base. This offer of assistance was again in addition to the company's entitlement to regional development grant. The offer of regional selective assistance was accepted by the company in August 1986. However, I can assure the House that no payments of either regional selective assistance or regional development grant have been made to the company in respect of this major project.
My right hon. and learned Friend visited Uddingston in September 1986, and in applauding the development praised both management and work force for their efforts in attracting such an important project which would ensure the plant's future for years to come. In reply, the Caterpillar representative spoke of the need to invest and train, and said that the project could be looked upon as an insurance, as my hon. Friend said, against the loss of 1,200 jobs at Uddingston. All seemed set fair for the future.
It was on 8 January 1987 that my officials first learned of the possibility that the company might not proceed with this major investment programme, and might close the Uddingston plant. The possibility of closure was being considered in the light of a further review of the group's global capacity. On 9 January my right hon. and learned Friend contacted Caterpillar in Peoria, Illinois, urgently asking for clarification of the position and indicating that he had instructed an official from our Locate in Scotland Chicago office to call on the company to discuss the matter. An official from Chicago visited the company in Peoria on Monday 12 January. At that stage the company


was not prepared to discuss the outcome of its review but confirmed that one option being considered involved the closure of Uddingston.
There were further contacts with the company the following day, 13 January, but on 14 January Caterpillar formally announced its intention to close the Uddingston plant. The announcement also made it clear that two plants in the United States of America were also to close — one at Davenport, Iowa, and a second at Dallas, Oregon. We understand that the company's plant at Leicester, which manufactures backhoe loaders, is secure.
My right hon. and learned Friend sought urgent talks with the company and on 20 January my right hon. and learned Friend and I met the president of Caterpillar and his senior colleagues in London. We left the company in no doubt about the strength of feeling in the United Kingdom following its decisiion—particularly following the very positive announcement in September. I am sorry to say that we received no satisfactory explanation of the company's change of mind. At the conclusion of the meeting, my right hon. and learned Friend invited Caterpillar to reconsider its decision to close Uddingston. We await the company's response.
Following the meeting with Caterpillar's senior management, my right hon. learned Friend met leaders of the Amalgamated Engineering Union and representatives of the work force.
I have felt it useful to recount this narrative to the House at some length to underline two important points. First, the Scottish Office had little forewarning that the company had changed its plans, but as soon as we became aware of the possibility, high-level contacts were immediately made with the company. Secondly, when the intention to close was announced, my right hon. and learned Friend took immediate steps to make his concern known to senior representatives of the company.
I should also emphasise that the Government's concern arises not from any wish to intervene in the affairs of private companies. The circumstances of this case are highly unusual. In September the company accepted an offer of Government financial assistance for a major new project, the specific purpose of which was to give the Uddingston plant a future. My right hon. and learned Friend, at the company's invitation, participated in the public announcement of the plans. Three to four months later, and with no warning, not only is this major new investment cancelled but it is announced that the plant itself, which has been there for 30 years and which has successful products and a good work force, is to close, with the loss of 1,200 jobs. What happened in those three to four months to cause such a dramatic change of plan has as yet not been explained other than in the most general terms.
The company made plain, both in September and subsequently, its satisfaction with the package of regional aid offered to it. The hon. Member for Motherwell, North referred to Belgium. I can reassure him that there have been no problems over regional assistance. If it were a case of trying to find more regional assistance, and if that would resolve the problem, we would be willing to consider it.
In these circumstances, the Government's great concern should come as no surprise to anybody. My hon. Friend the Member for Dumfries (Sir H. Monro) referred to the circumstances of one of the suppliers of Caterpillar, Penran in his constituency. I fully understand the serious impact that this decision could have on that company. All I can say to my hon. Friend at this stage is that if the worst were to happen, we would be anxious to do what we could to help that company find alternative markets.
Having described the circumstances surrounding Caterpillar's declared intention to close its Uddingston plant, it may be helpful to hon. Members if I add one or two comments concerning the wider implications of these events for our policy on inward investment. I know that this has been a subject of considerable comment in recent days.
I do not for one moment underestimate the gravity of the consequences should Caterpillar untimately implement its declared intention to close the Uddingston plant. Nevertheless, we must still not get things out of perspective. Within a few days of Caterpillar's announcement, there were two other important announcements of major new inward investments. Together these will bring to the west of Scotland roughly as many jobs as there are presently at Caterpillar. I refer, as hon. Members will have guessed, to the anouncement by Compaq Computer Corporation to site its new European manufacturing plant at Erskine. I also refer to the announcement made only a few days ago by the Kymmene-Stromberg Corporation of Finland of its intention to construct a new paper mill at a site in Irvine. This will be the largest-ever single inward investment and will provide around 480 new jobs directly and 400 related jobs throughout Scotland. Together, then, these two announcements promise something over 1,200 new jobs within the next few years.
Serious and regrettable though Caterpillar's announcement may be, it is no reason for us to jump to hasty and unwarranted conclusions about the important overall role that multinational firms are playing in Scotland, and I am quite confident they will continue to play as far ahead as we can see.
Turning back to Caterpillar, I do not think it is profitable at this stage to speculate on what will happen if the company is not prepared to review its latest decision. For the moment, as I have indicated, we await the company's response in the light of its meeting with my right hon. and learned Friend and myself. Our objective remains quite clear. It is to do everything possible to try to ensure the continuation of manufacturing operations and employment at the Uddingston facility. To that end, we have indicated to the company a readiness to discuss with it what possibilities of achieving this may exist. We have made it clear that this is not a question of trying to persuade it to do something that is against its commercial interest. We believe, however, that, given the success of the plant's products and the strength of its work force, a careful review of the apparently hasty decision to close is worth undertaking. I and my colleagues stand ready to help in whatever way is possible to find a way forward.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past Twelve o'clock.